Abercrombie & Fitch, once a favorite of loyal teens, is considering lowering prices on all items it sells in an effort to win them back after several years of sales declines. A&Fs total sales were $4 billion last year, but they have been declining in face of a weak economy and an intensively competitive retail environment. Price reductions are often effective in increasing sales, but marketers need to analyze how much sales must go up before a price reduction pays off and increases revenue enough to make it worth doing. Refer to Appendix 3: Marketing by the Numbers (and the notes below) to answer the following questions.

Question 1) By what percentage must costs decrease if A&F wants to maintain the gross margin percentage of 60%?