The Following Income Statements Are Provided for Two Companies Operating

question 85

Multiple Choice

The following income statements are provided for two companies operating in the same industry: $\begin{array}{|l|c|c|}\hline&\text { Felix Company}& \text {Jinx Company }\\\hline\text { Reverule } & \$ 200,000 & \$ 200,000 \\\hline \text { Variable costs } & (25,000) & (70,000) \\\hline \text { Contribution margin } & 175,000 & 130,000 \\\hline \text { Fixed costs } & (70,000) & (25,000) \\\hline \text { Net income } & \$ 105,000 & \$ 105,000\\\hline\end{array}$

Assuming sales increase by $1,000, select the correct statement from the following:

• A)Felix's net income will be more than Jinx's.
• B)Only Felix will experience an increase in profit.
• C)Felix's net income will increase by $250.
• D)Jinx's net income will increase by 6%.

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Definitions:

Finished Goods Inventory

Inventory of finished goods available for sale.

Standard Costs

Predetermined costs used for product costing, budgeting, and measuring performance, usually reflecting ideal expenses under normal conditions.

Work in Process

Goods in various stages of production within a factory, not yet completed but also not raw materials.

Fixed Manufacturing Overhead

The costs associated with production that do not change with the level of output, such as depreciation of equipment and salary of the factory manager.