Reed Corporation reports 2017 sales of $415 million, income before income taxes of $122.3 million and tax expense of $35.9 million.
If sales are projected to increase by 4% next year, projected tax expense for 2018 will be:

Question

Quizplus · Accepted Answer

The projected tax expense for 2018 cannot be determined with the information provided because we do not know the tax rate or whether the relationship between sales and income before taxes (or the cost structure of the company) will remain constant. An increase in sales does not directly translate to a proportional increase in tax expense without additional information about expenses and the applicable tax rate.

Reed Corporation Reports 2017 Sales of $415 Million, Income Before