The following information is for Gable,Inc.and Harlowe,Inc.for the recent year. $$\begin{array} { l r r r }
& \text { Gable, Inc. } & \text { Harlowe, Inc. } \
\text { Sales } & \$ 800,000 & \$ 800,000 \
\text { Variable costs } & \underline{ 400,000 }& \underline{200,000 }\
\text { Contribution margin } & 400,000 & 600,000 \
\text { Fixed costs } & \underline{200,000 } & \underline{ 400,000} \
\text { Income from operations }& \underline{ \$ 200,000 }& \underline{ \$ 200,000}
\end{array}$$ What total amount of net income will Harlowe,Inc.earn if it experiences a 10 percent increase in revenue?
A) $180, 000
B) $80,000
C) $260,000
D) $20,000

Question

The following information is for Gable,Inc.and Harlowe,Inc.for the recent year. $$\begin{array} { l r r r } 
& \text { Gable, Inc. } & \text { Harlowe, Inc. } \
\text { Sales } & \$ 800,000 &  \$ 800,000 \
\text { Variable costs } & \underline{ 400,000 }&  \underline{200,000 }\
\text { Contribution margin } & 400,000 &  600,000 \
\text { Fixed costs } &  \underline{200,000 } & \underline{ 400,000} \
\text { Income from operations }& \underline{ \$ 200,000 }& \underline{ \$ 200,000}
\end{array}$$  What total amount of net income will Harlowe,Inc.earn if it experiences a 10 percent increase in revenue?
A) $180, 000
B) $80,000
C) $260,000
D) $20,000

Quizplus · Accepted Answer

To find Harlowe, Inc.'s net income, we need to multiply their revenue by their profit margin. Their profit margin is 5 percent, so if their revenue increases by 10 percent, their net income will increase by 10 percent of their current net income.

Harlowe, Inc.'s revenue is $1,300,000 x 10% = $130,000

Their current net income is $1,300,000 x 5% = $65,000

So their new net income will be $65,000 + $130,000 = $195,000

Therefore, the correct answer is C) $260,000.

The Following Information Is for Gable,Inc What Total Amount of Net Income Will Harlowe,Inc