Pool Company's Variable Expenses Are 36% of Sales

question 35

Multiple Choice

Pool Company's variable expenses are 36% of sales.Pool is contemplating an advertising campaign that will cost $20,000.If sales increase by $80,000,the company's net operating income should increase by:

• A)$28,800
• B)$64,000
• C)$8,800
• D)$31,200

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Definitions:

Contractual Interest Rate

The rate of interest agreed upon within the terms of a loan or bond agreement, payable to lenders or bondholders.

Premium on Bonds Payable

The extra amount over the face value that investors are willing to pay for a bond, reflecting better interest or lower risk.

Debit Balance

A situation in an account where the sum of debits exceeds the sum of credits, indicating assets or expenses.

Contra Account

An account used in financial reporting to reduce the value of a related account, creating a net balance that reflects the true value of an asset or revenue.