Tutor, Inc. (TI) provides instructional services to its customers. TI charges $250 per student. The Company expects to serve 750 students during the coming year. All of the Company's expenses are fixed. Total annual fixed cost are projected to be $85,000. If the estimated number of students increase by 20%, net income will increase by: (Round your final answer to the nearest percent.)

Question

Business

Lance Singleton

14 January, 03:44

Tutor, Inc. (TI) provides instructional services to its customers. TI charges $250 per student. The Company expects to serve 750 students during the coming year. All of the Company's expenses are fixed. Total annual fixed cost are projected to be $85,000. If the estimated number of students increase by 20%, net income will increase by: (Round your final answer to the nearest percent.)

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Answers (1)

Know the Answer?

Coby Doyle · Answer 1

37%

Explanation:

The computation is shown below:

In the first case,

The net income is

= Sales revenue - fixed cost

where,

Sales revenue = Number of students * TI charges per student

= 750 students * $250

= $187,500

So, the net income is

= $187,500 - $85,000

= $102,500

Now on the second case

The net income is

= Sales revenue - fixed cost

where,

Sales revenue = Number of students * TI charges per student

= 900 students * $250

= $225,000

So, the net income is

= $225,000 - $85,000

= $140,000

So, the percentage increase is

= ($140,000 - $102,500) : ($102,500)

= 37%