A Calgary firm currently has sales of $630,000 and costs of $553,636. The marginal tax rate is 34%. Under the percentage of sales approach, what is the projected net income if sales are expected to increase by 15%?

Question

Quizplus · Accepted Answer

To find the projected net income, first calculate the projected sales: $630,000 * 1.15 = $724,500. Then, calculate the projected costs using the same percentage increase: $553,636 * 1.15 = $636,681. Subtract the projected costs from the projected sales to find the projected profit before tax: $724,500 - $636,681 = $87,819. Finally, calculate the net income by applying the tax rate: $87,819 * (1 - 0.34) = $57,961.

A Calgary Firm Currently Has Sales of $630,000 and Costs