Detailed Answer
Answer (D) is correct. Earnings before interest and taxes (EBIT) = Revenue – COGS – Operating Expenses – Depreciation and Amortization. If the sale of headboards increases by 50%, Oak Fine Furnishings will now sell 6,000 headboards (4,000 × 1.5). Given the sale of 6,000 headboards, EBIT is calculated as follows:
($100 × 6,000) – ($55 × 6,000) – $150,000 = $120,000