Asked by Belle Vivero on May 05, 2024
Verified
How much will Square Yard Products Inc.'s total income from operations increase?
A) $32,000
B) $112,000
C) $80,000
D) $150,000
Income From Operations
Earnings generated from a company's regular, core business operations, excluding deductions of interest and taxes.
- Discern and differentiate the strategies for measuring and controlling the outcomes of investment centers.
Verified Answer
ZK
Zybrea KnightMay 08, 2024
Final Answer :
C
Explanation :
Based on the given information, a 20% increase in sales revenue will result in a $80,000 increase in income from operations. To calculate this, we can use the following equation:
Increase in income = Increase in sales revenue x Contribution margin ratio
The contribution margin ratio is the percentage of each dollar of sales that contributes to income from operations, and we are given that it is 40%. So, the calculation is:
Increase in income = (20% x $1,000,000) x 40%
Increase in income = $200,000 x 0.4
Increase in income = $80,000
Therefore, the best choice is C) $80,000.
Increase in income = Increase in sales revenue x Contribution margin ratio
The contribution margin ratio is the percentage of each dollar of sales that contributes to income from operations, and we are given that it is 40%. So, the calculation is:
Increase in income = (20% x $1,000,000) x 40%
Increase in income = $200,000 x 0.4
Increase in income = $80,000
Therefore, the best choice is C) $80,000.
Learning Objectives
- Discern and differentiate the strategies for measuring and controlling the outcomes of investment centers.
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