If pretax profits decrease by 13.8 percent when the DOL is 3.8, then the decrease in sales is:
A)0.28 percent
B)2.75 percent
C)3.63 percent
D)10.00 percent DOL =
3)8 =
3)8X = -13.8%
X = 3.63%

Question

Quizplus · Accepted Answer

Using the formula for DOL: 
DOL = percentage change in pretax profits / percentage change in sales

We can rearrange it to find the percentage change in sales: 
Percentage change in sales = percentage change in pretax profits / DOL

Plugging in the given values: 
DOL = 3.8 
Percentage change in pretax profits = -13.8%

Percentage change in sales = (-13.8%) / (3.8) = -3.63%

Therefore, the decrease in sales is 3.63%, which corresponds to answer choice C.

If Pretax Profits Decrease by 13