What are the incremental pre-tax profits from this proposal?
A)$181,250
B)$206,500
C)$231,250
D)$256,250

Question

Quizplus · Accepted Answer

To calculate the incremental pre-tax profits, we subtract the current year's profit from the projected profit after implementing the proposal.

Projected Profit after implementing the proposal: 
Revenue: 1,400,000 + 100,000 = 1,500,000 
Cost of Goods Sold: 700,000 + 50,000 = 750,000 
Gross Profit: 1,500,000 - 750,000 = 750,000 
Operating Expenses: 400,000 + 70,000 = 470,000 
Profit before Taxes: 750,000 - 470,000 = 280,000

Incremental Pre-Tax Profits = (Profit after proposal) - (Current Year's Profit) 
= 280,000 - 48,750 
= $231,250

Therefore, the best choice is C) $231,250.

What Are the Incremental Pre-Tax Profits from This Proposal