Answer:
b. 13.9%
Explanation:
sales                   7,000,000
variable cost   <u>  (3,000,000)  </u>
contribution       4,000,000
fixed cost           (1,500,000)
interest              <u>   (480,000)  </u>
EBT                     2,020,000
tax expense          (707,000)
net income           1,313,000
contribution margin 4,000,000 / 7,000,000 = 4/7
if sales increase by 7%: 
7,000,000 x 0.07 x 4/7 x (1- 0.35) = 182,000
income after increase in sales: 1,313,000 + 182,000 = 1,495,000
increase in earnings: 1,495,000 / 1,313,000 - 1 = 0.138613861 = 13.9%