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For an Organization with Annual Sales of $500 Million,purchases of $300

Question 2

Multiple Choice

For an organization with annual sales of $500 million,purchases of $300 million and profit of $50 million,a 10 percent reduction in the cost of purchases would result in a profit-leverage effect of:

A) 10 percent (sales increase of 10 percent would be required to achieve the same percentage increase in profit) .
B) 15 percent (sales increase of 15 percent would be required to achieve the same percentage increase in profit) .
C) 10 percent (sales increase of 50 percent would be required to achieve the same percentage increase in profit) .
D) 60 percent (sales increase of 60 percent would be required to achieve the same percentage increase in profit) .
E) 75 percent (sales increase of 75 percent would be required to achieve the same percentage increase in profit) .

Correct Answer: