A company has $3.25 million in revenue and has a revenue cost of $1 million. Which of the following statements is true?
A) In order to have a net income of more than $1.5 million, the operating expenses and income taxes need to be less than $0.25 million.
B) In order to have a net income of more than $1.5 million, the operating expenses and income taxes need to be less than $0.75 million.
C) In order to have a net income of more than $1.5 million, the operating expenses and income taxes need to be less than $1.75 million.
D) In order to have a net income of more than $1.5 million, the operating expenses and income taxes need to be less than $2.25 million.
E) In order to have a net income of more than $1.5 million, the operating expenses and income taxes need to be less than $2.75 million.

Question

Quizplus · Accepted Answer

Net income can be calculated by subtracting the revenue cost (which is $1 million) from the total revenue (which is $3.25 million), giving us $2.25 million. In order to have a net income of more than $1.5 million, the operating expenses and income taxes combined must be less than the difference between the net income and $1.5 million. 
So, $2.25 million (net income) - $1.5 million = $0.75 million. Therefore, operating expenses and income taxes need to be less than $0.75 million to achieve a net income of more than $1.5 million. 
Thus, the correct choice is B.

A Company Has $3