The cost of goods sold includes $1,200,000 of fixed manufacturing overhead; the operating expenses include $100,000 of fixed mar
keting expenses. A special order offering to buy 50,000 units for $7.50 per unit has been made to Tram. Fortunately, there will be no additional operating expenses associated with the order and Tram has sufficient capacity to handle the order. How much will operate profits be increased if Tram accepts the special order
1 answer:
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Answer:
a) 27.2%
b) No
Explanation:
Given:
Monthly gross income = $2,000
Federal, state, and local income taxes = $400
Social Security taxes per month = $160
IRA per month = $80
Monthly credit payments for Visa, = $35
Monthly credit payments for MasterCard, = $30
Monthly credit payments for Discover cards = $20
Automobile loan payment = $285
Now,
Net income of Louise = Gross income - Total Taxes - IRA
= $2,000 - ( $400 + $160 ) - $80
= $1,360
Total debt payments = Credit card payments + Automobile loan payment
= ( $35 + $30 + $20 ) + $285
= $370
Therefore,
Debt payments-to-income ratio =
=
= 0.272
or
= 0.272 × 100% = 27.2%
(b) An individual should not spend more than 20% of their net income as debt to be within the means.
Since, the debt payments-to-income ratio exceeds 20 percent of her net income.
Hence, Louise is not living within her means