In 2020, the Merkel Company had revenues of $2,000,000 and costs of $1,500,000. During 2021, Merkel will be introducing a new product line that is expected to increase sales revenue by $200,000 and costs by $160,000. Assuming no changes are expected for the other products, the operating profits are expected to increase by:
A) $540,000.
B) $200,000.
C) $160,000.
D) $40,000.

Question

Quizplus · Accepted Answer

The increase in operating profits is calculated by subtracting the increase in costs ($160,000) from the increase in sales revenue ($200,000), resulting in an increase of $40,000.

In 2020, the Merkel Company Had Revenues of $2,000,000 and Costs