Answer: D. Income would increase by about 51%
Explanation:
Income before sales increase:
= Sales - Variable costs - Fixed costs
= (8 * 14,000 units) - ( (1.20 + 0.40) * 14,000 units) - (40,000 + 32,000)
= 112,000 - 22,400 - 72,000
= $17,600
Income after sales increase:
New sales = 14,000 * (1 + 10%) = 15,400 units
= (8 * 15,400) - ( (1.20 + 0.40) * 15,400) - (40,000 + 32,000)
= $26,560
Percentage increase:
= (26,560 - 17,600) / 17,600
= 50.9%
= 51%
