Cost Behavior atBest Buy.The following condensed income statement is forBest Buy Co., Inc., a large retailer of consumer electronics.

Required:

Assume that cost of goods sold comprises only variable costs, and selling and administrative expenses are all fixed costs. Also assume thatBest Buyexpects sales to grow by 10 percent for the year ended March 3, 2012.

1.Calculate expected operating income for the year ended March 3, 2012 assuming the company is still within the relevant range of activity.

2.Calculate the expected percent increase in operating income from the year ended February 26, 2011, to the year ended March 3, 2012.

3.Why is the percent increase in operating income higher than the percent increase in sales?

4.Is the assumption that all selling and administrative expenses are fixed a reasonable assumption? Explain.