Acme Auto Repair developed a new diagnostic testing procedure that is expected to increase sales by $10,000 per month.As more drivers bring in their vehicles,Acme expects to also do more oil changes and brake repairs.As a result,inventory levels of oil and brake parts must be increased by $5,000.Revenues from oil changes and brake jobs are expected to increase by $4,000 per month.An example of an increase in net working capital requirements from the new diagnostic testing procedure is the

Question

Quizplus · Accepted Answer

The increase in inventory levels of oil and brake parts of $5,000 is an example of an increase in net working capital requirements. This is because it represents an increase in the amount of funds necessary to support the increased demand for oil changes and brake repairs resulting from the new diagnostic testing procedure. The increase in revenue of $10,000 per month for the diagnostic testing and the increase in revenues from oil changes and brake jobs of $4,000 per month are not examples of an increase in net working capital requirements, as they represent increases in revenue rather than increases in the amount of funds required to support the increased activity. The option D is incorrect because it wrongly adds up all the activities.

Acme Auto Repair Developed a New Diagnostic Testing Procedure That