You are really old. You started a small garage-sale business after you retired, and in the first year, you have the following earnings and expenses: $25,000 in sales, $9,000 in cost of merchandise; $1,000 in gasoline and depreciation on your old pick-up truck, and $5,000 in rent on the storage for your junk. You have decided that the gasoline/depreciation expense is probably a variable expense. Since the storage shed that you rent has much higher capacity than you are using, now, you are calculating what would happen if you expanded your efforts

Without preparing a new income statement, how much net income would you make if you are able to quadruple your sales next year? (hint; if your sales quadruple, they are increasing by 300%.)

Your friend, Mo, has decided to get into the business as well; his strategy is to leverage his fixed expenses. He rents storage space for $10,000, and spends little to nothing on his merchandise, mostly just picking up stuff that people are throwing out at the curb and combing through old garbage at the dollar stores. His total variable expenses are just $5,000.

With a quadrupling of his sales of $25,000, how much would his net income be in the second year?