Question

QUESTION 38

1. Cars and Motors Inc. sells 600 cars each month on average for $1,550,000 per unit. Monthly reports show that each unit has a variable cost of $675,000, with 40% on labor and 60% on materials used. Monthly fixed operating costs, such as utilities and lease rentals, are $89,500,000, while monthly fixed financing costs are $18,750,000. Top management believes that they can secure majority of the market share by achieving 15% sales growth. Once the target sales growth has been achieved, by how much percentage change in net income should Cars and Motors expect?

	a.	7.23%
	b.	18.90%
	c.	44.87%

Answer 1