Ask Question
1 April, 00:05

You own a small boutique that sells scented soaps and lotions as well as handmade jewelry. You are considering moving locations to a higher-traffic area of town. You believe this will increase your contribution margin from $127,000 to $218,000 per year. Rent, however, will increase by $400 per month, and utilities will increase by $150 per month. You will also need to hire two additional employees at a cost of $24,000 each annually.

Should you make the move?

A. Yes, because profit would increase by $84,400 annually.

B. Yes, because profit would increase by $36,400 annually.

C. No, because profit would decrease by $48,000 annually.

D. No, because profit would decrease by $6,600 annually.

+5
Answers (1)
  1. 1 April, 03:35
    0
    The correct answer is B.

    Explanation:

    Giving the following information:

    You believe this will increase your contribution margin from $127,000 to $218,000 per year. Rent, however, will increase by $400 per month, and utilities will increase by $150 per month. You will also need to hire two additional employees for $24,000 each annually.

    We need to calculate the effect of moving in the net income of the company:

    Effect on income = (218,000 - 127,000) - (400*12) - (150*12) - 24,000*2

    Effect on income = $36,400 increase
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “You own a small boutique that sells scented soaps and lotions as well as handmade jewelry. You are considering moving locations to a ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers