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Answer (B) is correct . The company’s manufacturing and selling costs exclusive of bad debts equal 70% of sales. Hence, the gross profit on the $100,000 increase in sales will be ? $30,000 ($100,000 × 30%). The increase in after-tax profit is calculated as follows: Increase in gross profit $30,000 Less: uncollectible accounts ($100,000 × 15%) (15,000) Less: collection costs ($100,000 × 5%) (5,000) Increase in pre-tax income $10,000 Less: income tax expense ($10,000 × 40%) (4,000) Increase in after-tax income $6,000

Answer (A) is incorrect because The amount of $4,000 is the tax expense on the increased income.
Answer (C) is incorrect because The amount of $9,000 does not include collection costs in calculating income.
Answer (D) is incorrect because The amount of $10,000 does not include the effect of taxes.