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-Kooshy Company wishes to maintain its dividend policy in the upcoming year.What will be the pro forma addition to retained earnings if sales are forecasted to increase 20% and all costs are proportional to sales?

Question

NARRBEGIN: Kooshy
  
-Kooshy Company wishes to maintain its dividend policy in the upcoming year.What will be the pro forma addition to retained earnings if sales are forecasted to increase 20% and all costs are proportional to sales?

Quizplus · Accepted Answer

If sales increase by 20%, the increase in retained earnings can be calculated by multiplying the current year's retained earnings by the percentage increase in sales, which is:

Increase in Retained Earnings = Current Year's Retained Earnings x Percentage Increase in Sales
= $225 x 20%
= $45

Therefore, the correct answer is D) $45.

NARRBEGIN: Kooshy -Kooshy Company Wishes to Maintain Its Dividend Policy in the Its