Sales are $150,000 p.a., cost of sales is $100,000 p.a., fixed expenses are $18,000 p.a. and net profit is $32,000. If there is a 10% p.a. increase in sales volume predicted, what will be the new net profit?

Question

Quizplus · Accepted Answer

The new sales volume will be $150,000 + ($150,000 * 10%) = $165,000. The cost of sales remains 66.67% of sales ($100,000/$150,000), so the new cost of sales will be $165,000 * 66.67% = $110,005. The new gross profit is $165,000 - $110,005 = $54,995. After subtracting fixed expenses of $18,000, the new net profit is $54,995 - $18,000 = $36,995, which rounds to $37,000.

Sales Are $150,000 P