Question

Geno's Body Shop had sales revenues and operating costs in 2020 of $790,000 and $595,000, respectively. In 2021, Geno plans to expand the services it provides to customers to include detailing services. Revenues are expected to increase by $113,000 and operating costs by $64,000 as a result of this expansion. Assuming that there are no changes to the existing body shop business, operating profits would be expected to increase during 2021 by:

A. $49,000
B. $113,000
C. $64,000
D. $177,000

Answer 1

With the expansion in services, Geno's Body Shop expects a $113,000 increase in revenues and a $64,000 increase in operating costs, which would lead to an increase in operating profits by $49,000 for the year 2021.

Step-by-step explanation:

Geno's Body Shop is expected to experience an increase in operating profits during 2021 due to the expansion of services, which includes adding detailing services to cater to more customers. The calculation for the expected increase in operating profit is done by subtracting the expected increase in operating costs from the expected increase in revenues.

For Geno's Body Shop:

• Expected increase in revenues: $113,000
• Expected increase in operating costs: $64,000
• Expected increase in operating profits: $113,000 - $64,000 = $49,000

Therefore, the correct answer is A. $49,000.