Follett Company Incurred a First Quarter Operating Loss Before Income

question 43

Multiple Choice

Follett Company incurred a first quarter operating loss before income tax effect of $2,000,000.This is a normal occurrence for Follett because of seasonal fluctuations.Experience has demonstrated the income earned during the remaining quarters far exceeds the first quarter losses each year.Follett estimates its annual income tax rate will be 35 percent.What net loss should Follett report for the first quarter?

• A)$0
• B)$700,000
• C)$1,300,000
• D)$2,000,000

---

Definitions:

Competitive Price-Taker

A rephrased scenario where businesses in competitive markets accept the prevailing market price as given because they have no power to influence it.

Profit

The financial gain realized when the revenue earned from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Marginal Revenue

The additional revenue that a firm receives from selling one more unit of a good or service.

Marginal Cost

The extra expense resulting from the manufacture of an additional unit of a product or service.