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A service company has the following financial information (in millions of $) Sales $ 510 Cost of outsourced facilitating goods 210 Cost of in-house services
A service company has the following financial information (in millions of $)
Sales | $ | 510 |
Cost of outsourced facilitating goods | 210 | |
Cost of in-house services provided | 199 | |
Administrative costs | 77 | |
Pretax earnings | 24 | |
(Do not round intermediate calculations. Round answers to 1 decimal place.) a. What is the profit leverage effect of reducing the cost of the facilitating goods in this company?
b. It has been suggested that the in-house services costs could be reduced by 10 percent in the coming year by implementing lean systems. What effect would this have on earnings increase in percentage?
c. What is the profit leverage effect of in-house services relative to profits?
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