Bell Brothers Has R3,000,000 in Sales

question 44

Multiple Choice

Bell Brothers has R3,000,000 in sales.Its fixed costs are estimated to be R100,000, and its variable costs are equal to fifty cents for every rand of sales.The company has R1,000,000 in debt outstanding at a before-tax cost of 10 percent.If Bell Brothers' sales were to increase by 20 percent, how much of a percentage increase would you expect in the company's net income?

• A) 15.66%
• B) 18.33%
• C) 19.24%
• D) 21.50%
• E) 23.08%

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Definitions:

Central Planning Agency

An organization responsible for directing economic activity according to a comprehensive plan, often in a centrally planned economy.

Business Firms

Entities that engage in commercial, industrial, or professional activities with the goal of generating profits for their owners or shareholders.

Equity

Ownership interest in a corporation in the form of common stock or preferred stock, representing a claim on its earnings and assets.

Efficiency

The ability to achieve maximum productivity with minimum wasted effort or expense, or the use of resources so as to maximize the production of goods and services.