Question

In 2020, the Merkel Company had revenues of $2,650,000 and costs of $2,150,000. During 2021, Merkel will be introducing a new product line that is expected to increase sales revenue by $265,000 and costs by $173,000. Assuming no changes are expected for the other products, the operating profits are expected to increase by:

Answer 1

$92.000

Step-by-step explanation:

1. The first step is to calculte the operating profits for the year 2020, following the next formula

(Revenues - costs) = Operating Profits.

YEAR 2020

Revenues 2.650.000

Costs 2.150.000

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Operating profits 500.000

2. Same indications for the next year.

YEAR 2021

Revenues 2.915.000

Costs 2.323.000

--------

Operating profits 592.000

3. Calculate the diference between 2021 and 2020.

592.000 - 500.000 = 92.000