Question
K-Street Armory Manufacturing Company's (KSAMC) market research has just indicated that due to market recovery from recent recession, KSAMC would be able to achieve, no
K-Street Armory Manufacturing Company's (KSAMC) market research has just indicated that due to market recovery from recent recession, KSAMC would be able to achieve, no less than, a fifteen percent increase in its sales in the quarter succeeding the first one this year. Because of its forecast, KSAMC has invested in the latest robots in its industry to enable it to produce the requisite volume while maintaining its cost leadership competitive position. This investment has shifted KSAMC quarterly fixed expenses to the present $80,000 (this was $55,000 for a long time in the past). KSAMCs present operating leverage is nine times (representing a shift from six times for a long time in the past). KSAMCs total sales this quarter is $120,000.
Required: Assuming that KSAMCs market research would be right on target, what would be the total relevant profit to expect in the quarter succeeding the first one this year if this first quarters relevant profit is $10,000? (Please, show your computations below!)
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