Fontana Painting Had the Following Data for the Most Recent

question 79

Multiple Choice

Fontana Painting had the following data for the most recent year (in millions) .The new CFO believes that the company could improve its working capital management sufficiently to bring its NWC and CCC up to the benchmark companies' level without affecting either sales or the costs of goods sold.Fontana finances its net working capital with a bank loan at an 8% annual interest rate,and it uses a 365-day year.If these changes had been made,by how much would the firm's pre-tax income have increased?

• A) 1,901
• B) 2,092
• C) 2,301
• D) 2,531
• E) 2,784

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Definitions:

Variable Costs

Expenses that change in proportion to the level of production or sales volume.

Fixed Costs

Fixed expenses, including rent, salaries, and insurance, that are unaffected by variations in production or sales levels.

Units Produced

A measure of output representing the total number of units of a product made by a company or an industry during a given period.

Costs

The monetary value spent by a company to produce goods or services, including expenses such as materials, labor, and overhead.