Question

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.)

Answer 1

Answer:

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%