Assuming a constant proﬁt margin, what will Stansﬁeld Corporation's net income be if sales increase by 10% ($ in millions) ?

Question

Assuming a constant proﬁt margin, what will Stansﬁeld Corporation's net income be if sales increase by 10% ($ in millions)?

Quizplus · Accepted Answer

Since the problem assumes a constant profit margin, we can use the equation:

Net Income = Profit Margin x Sales

We are given that the initial sales are $363 million, and we need to find the net income when sales increase by 10%, or $39.3 million.

To find the profit margin, we can use the equation:

Profit Margin = Net Income / Sales

We rearrange this equation to solve for net income:
Net Income = Profit Margin x Sales

The problem doesn't provide us with the profit margin, so we need to find it. The profit margin can be calculated as:

Profit Margin = Net Income / Sales

We can use the initial data to find the profit margin:
Profit Margin = $33 million / $330 million
Profit Margin = 0.1

This means that Stanfield Corporation's profit margin is 10%.

Now that we have the profit margin, we can find the net income when sales increase by 10%:

Net Income = Profit Margin x Sales 
Net Income = 0.1 x $363 million 
Net Income = $36.3 million

Therefore, the answer is C) $36.3 million.

Assuming a Constant Proﬁt Margin, What Will Stansﬁeld Corporation's Net