Canadian Foods, Inc. produces food products under various brand names. In 2007, the company’s sales increased by 10 percent and its 2007 income statement showed the following (in millions):

Suppose that the cost of goods sold is the only variable cost; selling, administrative, general, and interest expenses are fixed with respect to sales. Assume that Canadian Foods had another 10 percent increase in sales in 2008 and that there was no change in costs except for increases associated with the higher volume of sales. Compute the predicted 2008 operating profit for Canadian Foods and the percentage increase in operating profit. Explain why the percentage increase in profit differs from the percentage increase in sales.

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Net sales Cost of goods sold Selling, administrative, and general expense Interest expense Operating income (before tax) $24,002 20,442 2,265 277 $ 1,018