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23 February, 01:03

In 2016, the TransUnion Company had consulting revenues of $1,000,000 while costs were $750,000. In 2017, TransUnion will be introducing a new service that will generate $150,000 in sales revenues and $60,000 in costs. Assuming no changes are expected for the other services, operating profits are expected to increase between 2016 and 2017 by: A) $250,000. B) $60,000. C) $90,000. D) $150,000.

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  1. 23 February, 02:04
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    C) $90,000

    Explanation:

    Increase in operating profits from 2016 to 2017

    Step 1: Calculate Operating Profits in 2016

    Operating Profit = Revenues - Costs

    = $1,000,000 - $750,000

    = $250,000

    Step 2: Calculate Operating Profits in 2017

    The operating profit will reflect that there is an increase in operating profits by $150,000 and costs will also increase by $60,000

    = ($1,000,000 + $150,000) - ($750,000 + $60,000)

    = $1,150,000 - $810,000)

    = $340,000

    Step 3: Calculate the operating profits increase

    The formula is Operating profits for 2017 - the operating profits for 2016

    = $340,000 - $250,000

    = $90,000
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