A retailer attempting to improve its efficiency from 40 to 50 percent reduced its operating expense budget from $600,000 to $500,000.However,its new efficiency remained at 40 percent.What happened?
A) Sales decreased from $1,000,000 to $800,000.
B) Sales decreased from $1,000,000 to $833,333.
C) Sales decreased from $1,000,000 to $900,000.
D) Sales increased from $1,000,000 to $1,200,000.

Question

Quizplus · Accepted Answer

The retailer's efficiency did not improve from 40 to 50 percent despite reducing the operating expense budget. This indicates that the primary factor affecting efficiency is not the operating expense budget. Instead, the decrease in the operating expense budget likely had a negative impact on sales, which ultimately resulted in the same efficiency level of 40 percent. Using the formula for the efficiency ratio (Efficiency ratio = Sales / Operating expenses), we can determine that the retailer's sales decreased from $1,000,000 to $833,333.

A Retailer Attempting to Improve Its Efficiency from 40 to 50