Answered

Tutor, Inc. (TI) provides instructional services to its customers. TI charges $200 per student. The Company expects to serve 500 students during the coming year. All of the Company's expenses are fixed. Total annual fixed cost are projected to be $60,000. If the estimated number of students increase by 10%, net income will increase by_______.

a. 25%.
b. 30%.
c. 10%.
d. 20%.

Answer :

Answer:

correct answer is a. 25%

Explanation:

given data

TI charges = $200 per student

expects students = 500

Total annual fixed cost = $60,000

students increase = 10% = 0.10 × 500 = 50 + 500 = 550

solution

first we get here revenue from 500 students that is

revenue = 500 × 200 = $100000    .............1

and revenue by 550 students

revenue = 550  × 200 = $110000     ................2

so net income for 500 students will be

net income = 100000 - 60000 = $40000

and

net income for 550 students will be

net income = 110000 - 60000 = $50000

so here we get change is $50000 - $40000 = $10000

so net income will increase as = [tex]\frac{10000}{40000}[/tex] × 100

net income will increase as = 25%

correct answer is a. 25%

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