John Owen Owns a Drugstore That Is Experiencing Significant Growth

question 37

Multiple Choice

John Owen owns a drugstore that is experiencing significant growth. Owen is trying to decide whether to expand its capacity, which currently is $200,000 in sales per quarter. Sales are seasonal. Forecasts of capacity requirements, expressed in sales per quarter for the next year, follow.
Owen is considering expanding capacity to the $250,000 level in sales per quarter. The before-tax profit margin from additional sales is 15 percent. How much would before-tax profits increase next year because of this expansion?

• A) less than $15,000
• B) more than $15,000 but less than $16,000
• C) more than $16,000 but less than $17,000
• D) more than $17,000

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