John Owen Owns a Drugstore That Is Experiencing Significant Growth

Multiple Choice

John Owen owns a drugstore that is experiencing significant growth. Owen is trying to decide whether to expand its capacity, which currently is $200,000 in sales per quarter. Sales are seasonal. Forecasts of capacity requirements, expressed in sales per quarter for the next year, follow.

Owen is considering expanding capacity to the $250,000 level in sales per quarter. The before- tax profit margin from additional sales is 15 percent. How much would before- tax profits increase next year because of this expansion?

A) less than $15,000
B) more than $15,000 but less than $16,000
C) more than $16,000 but less than $17,000
D) more than $17,000