Musk L Flexor Owns a Hot Tub Store That Is Experiencing

question 95

Multiple Choice

Musk L. Flexor owns a hot tub store that is experiencing significant growth. Flexor is trying to decide whether to expand its capacity, which currently is at $750,000 in sales per quarter. He is thinking about expanding to the $850,000 level. The before- tax profit from additional sales is 20 percent. Sales are seasonal, with peaks in the spring and summer quarters. Forecasts of capacity requirements, expressed in sales per quarter, for next year (year 2) are:

Demand in year 3 and beyond is expected to exceed $850,000 per quarter. Flexor is considering expansion at the end of the fourth quarter of this year (year 1) . How much would before- tax profits in year 2 increase because of this expansion?

• A) less than $28,000
• B) more than $28,000 but less than $32,000
• C) more than $32,000 but less than $36,000
• D) more than $36,000

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