Question

Tutor, Inc. (TI) provides instructional services to its customers. TI charges $360 per student. The Company expects to serve 1,300 students during the coming year. All of the Company's expenses are fixed. Total annual fixed cost are projected to be $140,000. If the estimated number of students increase by 10%, net income will increase by: (Round your final answer to the nearest percent.)

Answer 1

Answer:

14.27%

Explanation:

First,

Net income = Sales revenue - Fixed cost

Where

Sales revenue = Number of students × TI charges per students

= 1,300 students × $360

= $468,000

Hence,

Net income = $468,000 - $140,000 = $328,000

For the second case

Net income = Sales revenue - Fixed cost

Where

Sales revenue = Number of students × TI per students

= 1,430 students × $360

= $514,800

Net income = $514,800 - $140,000 = $374,800

The percentage increase

= ($374,800 - $328,000) ÷ $328,000

= 14.27%