CORRECT ANSWER C. EARNINGS PER SHARE WOULD INCREASE $.13 PER SH...
354.
Correct answer c. Earnings per share would increase $.13 per share as shown below.
Sales
$20,000,000
$22,000,000
(increase 10%)
Contribution (30%)
6,000,000
6,600,000
Less administrative
300,000
300,000
Less commission (10%)
2,000,000
2,200,000
Operating profit
3,600,000
4,000,000
Interest expense
400,000
400,000
Profit before tax
3,200,000
3,600,000
Tax @35%
1,120,000
1,260,000
Net income
$ 2,080,000
$ 2,340,000
Earnings per share
$1.04
$1.17
(NI ÷ 2,000,000)