Question

The following income statements are provided for two companies operating in the same industry:

Felix Company
Jinx Company Revenue $ 200,000 $ 200,000
Variable costs (25,000 ) (70,000 )
Contribution margin 175,000 130,000
Fixed costs (70,000 ) (25,000 )
Net income $ 105,000 $ 105,000
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) Correct 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%.

Answer 1

Answer: Felix's net income will be more than Jinx's.

Step-by-step explanation:

Bases on the information given, Felix net income will be:

Sales = 201000

Less: Variable cost = 25125

Contribution margin = 175875

Less: Fixed cost = 70000

Net income = 105875

Jinx company net income will be:

Sales = 201000

Less: Variable cost = 70350

Contribution margin = 130650

Less: Fixed cost = 25000

Net income = 105650

From the calculation, the correct option is A "Felix's net income will be more than Jinx's". It increases by $225.