Asked by Scarlet Melliz on Jun 27, 2024
Verified
What are the incremental pre-tax profits from this proposal?
A) $181,250
B) $206,500
C) $231,250
D) $256,250
Incremental Pre-tax Profits
Profits generated from a specific event or decision, calculated before taxes are deducted.
- Gain insight into the basis of credit policies and terms, as well as the influence of discounts on sales and profitability.
Verified Answer
DA
Dilyar ArkinJun 29, 2024
Final Answer :
C
Explanation :
To calculate the incremental pre-tax profits, we subtract the current year's profit from the projected profit after implementing the proposal.
Projected Profit after implementing the proposal:
Revenue: 1,400,000 + 100,000 = 1,500,000
Cost of Goods Sold: 700,000 + 50,000 = 750,000
Gross Profit: 1,500,000 - 750,000 = 750,000
Operating Expenses: 400,000 + 70,000 = 470,000
Profit before Taxes: 750,000 - 470,000 = 280,000
Incremental Pre-Tax Profits = (Profit after proposal) - (Current Year's Profit)
= 280,000 - 48,750
= $231,250
Therefore, the best choice is C) $231,250.
Projected Profit after implementing the proposal:
Revenue: 1,400,000 + 100,000 = 1,500,000
Cost of Goods Sold: 700,000 + 50,000 = 750,000
Gross Profit: 1,500,000 - 750,000 = 750,000
Operating Expenses: 400,000 + 70,000 = 470,000
Profit before Taxes: 750,000 - 470,000 = 280,000
Incremental Pre-Tax Profits = (Profit after proposal) - (Current Year's Profit)
= 280,000 - 48,750
= $231,250
Therefore, the best choice is C) $231,250.
Learning Objectives
- Gain insight into the basis of credit policies and terms, as well as the influence of discounts on sales and profitability.
Related questions
Sterling Industries Offers Customers Cash Discounts for Paying Their Bills ...
Net Price Is the Standard Price Charged to Customers
Salespeople Should Familiarize Themselves with the Company's Price, Discount, and ...
FOB Shipping Point Means the Buyer Pays All Shipping Costs
Markup Is the Dollar Amount of Money Added to the ...