Kershner says: "Our income statement should be looking good this year. We've been doing excellent business this year, so we have a lot of gross sales. The company should be in good shape." Michaels replies: "It remains to be seen how our income statement will look overall. In spite of strong sales revenue, the overall income statement might not be as good as we might hope."
Which of the following, if true, would strengthen Michaels's argument?
A) The company's gross sales went up from the previous year.
B) Total operating expenses were high in the current year.
C) The company has only one part-time accountant.
D) There were few sales returns in the current year.
E) Offshoring allowed the company to trim administrative salaries by 25 percent.

Question

Quizplus · Accepted Answer

If the company's total operating expenses were high in the current year, then it would reduce the company's overall income despite strong sales revenue. This would support Michaels's argument that the income statement might not be as good as they hope. The other options are either irrelevant, or would actually weaken Michaels's argument (such as option E which suggests that the company was able to trim expenses).

Kershner Says: "Our Income Statement Should Be Looking Good This