Geno's Body Shop had sales revenues and operating costs in 2016 of $650,000 and $525,000,respectively.In 2017,Geno's plans to expand the services it provides to customers to include detailing services.Revenues are expected to increase by $85,000 and operating costs by $50,000 as a result of this expansion.Assuming that there are no changes to the existing body shop business,what is the amount of operating profits that are expected be earned in 2017?

Question

Quizplus · Accepted Answer

Operating profits can be calculated by subtracting operating costs from revenues. 
In 2016, operating profits were $125,000 ($650,000 - $525,000). 
In 2017, with the expansion, revenues are expected to be $735,000 ($650,000 + $85,000) and operating costs are expected to be $575,000 ($525,000 + $50,000). 
Therefore, operating profits in 2017 are expected to be $160,000 ($735,000 - $575,000).

Geno's Body Shop Had Sales Revenues and Operating Costs in 2016