Given the following information:
$$\begin{array} { | l | r | }
\hline \text { Sales } & \$ 5,000 \
\hline \text { Fixed Expenses } & 2,000 \
\hline \text { Variable Expenses } & 1,750 \
\hline
\end{array}$$ What would expected net income be if the company experienced a 10 percent increase in fixed costs and a 10 percent increase in sales volume?
A) $1,750.
B) $1,550.
C) $1,250.
D) $1,375.

Question

Given the following information:
$$\begin{array} { | l | r | } 
\hline \text { Sales } & \$ 5,000 \
\hline \text { Fixed Expenses } & 2,000 \
\hline \text { Variable Expenses } & 1,750 \
\hline
\end{array}$$ What would expected net income be if the company experienced a 10 percent increase in fixed costs and a 10 percent increase in sales volume?
A) $1,750.
B) $1,550.
C) $1,250.
D) $1,375.

Quizplus · Accepted Answer

Explanation:The expected net income would be $1,375. The 10 percent increase in fixed costs would increase fixed expenses by $200, to $2,200. The 10 percent increase in sales volume would increase sales by $500, to $5,500. The variable expenses would increase by $175, to $1,925. The net income would be $5,500 - $2,200 - $1,925 = $1,375.

Given the Following Information What Would Expected Net Income Be If the Company Experienced