Palmer Company Below Is an Income Statement for Palmer Company

question 80

Multiple Choice

Palmer Company Below is an income statement for Palmer Company:
$\begin{array}{ll}\text { Sales } & \$ 400,000 \\\text { Variable costs } & \underline{(125,000) } \\\text { Contribution margin } & \$ 275,000 \\\text { Fixed costs } & \underline{(200,000) } \\\text { Profit before taxes } & \underline{\$ 75,000}\end{array}$ Refer to Palmer Company.Assuming that the fixed costs are expected to remain at $200,000 for the coming year and the sales price per unit and variable costs per unit are also expected to remain constant,how much profit before taxes will be produced if the company anticipates sales for the coming year rising to 130 percent of the current year's level?

• A)$97,500
• B)$195,000
• C)$157,500
• D)A prediction cannot be made from the information given.

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