The gross profit on the additional sales will be 40% of $80,000, or $32,000. Bad debt loss on the additional sales will be 6% of $80,000, or $4,800. Therefore, the before-tax profit on the additional sales will be $32,000 minus $4,800, or $27,200. $27,200 is 34% of $80,000 ($27,200 ÷ $80,000 = .34).
This is not the correct answer. Please see the correct answer for a complete explanation. We have been unable to determine how to calculate this incorrect answer choice. If you have calculated it, please let us know how you did it so we can create a full explanation of why this answer choice is incorrect. Please send us an email at support@hockinternational.com. Include the full Question ID number and the actual incorrect answer choice -- not its letter, because that can change with every study session created. The Question ID number appears in the upper right corner of the ExamSuccess screen. Thank you in advance for helping us to make your HOCK study materials better.
This answer results from subtracting the expected bad debt loss from the additional sales amount before calculating the return on sales. Instead, the expected bad debt loss should be subtracted from the expected gross profit on the additional sales.
This answer omits the cost of the expected bad debt loss on the additional sales.
|
