Frontier Corp.has fixed costs of $300,000 and profit of $150,000.If sales increase 20%,by how much will profits increase?
A)20%
B)30%
C)60%
D)90%

Question

Quizplus · Accepted Answer

Given the fixed costs and profit, the profit increase can be calculated by understanding the impact of the sales increase on the variable profit margin. A 20% increase in sales, assuming variable costs remain constant per unit, would lead to a higher percentage increase in profit because the fixed costs are already covered. The profit increase is disproportionately higher than the sales increase, leading to a 60% increase in profit when sales increase by 20%.