You and your business partner have a consulting business. You plan to attend an
ID: 3217581 • Letter: Y
Question
You and your business partner have a consulting business. You plan to attend an additional conference in the coming year. The cost to exhibit at this additional conference will be $10,000. You believe attending this additional conference will increase your revenue by $90,000. Based on the profit data for last year (presented below), calculate the increase in profit that can be expected if you attend this conference.
Revenue
$356,000
Less:
Salaries for 2 employees
$120,000
PO Box
$12,000
Depreciation of Consulting Equipment
$1,000
Advertising Materials (variable cost)
$17,500
Attending Annual Conferences as Exhibitors (Fees)
$12,000
Travel Expenses for Conferences
$2,600
Phone & Internet
$1,860
Other Advertising Expenses (e.g. internet page, annual subscriptions, etc.) (fixed cost)
$4,400
Annual Insurance
$6,500
Revenue
$356,000
Less:
Salaries for 2 employees
$120,000
PO Box
$12,000
Depreciation of Consulting Equipment
$1,000
Advertising Materials (variable cost)
$17,500
Attending Annual Conferences as Exhibitors (Fees)
$12,000
Travel Expenses for Conferences
$2,600
Phone & Internet
$1,860
Other Advertising Expenses (e.g. internet page, annual subscriptions, etc.) (fixed cost)
$4,400
Annual Insurance
$6,500
Explanation / Answer
Last Year Profit = Revenue - sum of Less = $356000 - $177860 = $178140
This Year Profit = (Last Year Revenue + $90000 ) - ( Last Year Cost + $10000 )
= ($356000 + $90000 ) - ($177860 + $10000 ) = $258140
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