Nutty Productions Inc. generated service revenue of $56,000 and income from operations of $23,000. The company estimates that, had it extended credit it would have instead generated $99,000 of service revenue, but it would have incurred $38,000 of additional expenses for wages and bad debts. 1-a. Using these estimates, calculate the amount by which Income from Operations would increase By

$5,000

Explanation:

Income from operations is the difference between the revenue from operations and the expenses incurred in the process of generating this revenue.

Given that extending credits  would have resulted in sales being $99,000 and an additional expense of $38,000, net income from operations would be

= $99,000 - $38,000 - $23,000

= $38,000

Income from operations without credit extension

= $56,000 - $23,000

= $33,000

Increase in operating income

=$38,000 - $33,000

= $5,000

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