Exercise Exercise: Procter & Gamble Company is a Cincinnati-based company that produces household products under brand names such as Gillette, Bounty, Crest, Folgers and Tide. The company's 2006 income statement showed the following (in millions): Net sales Costs of products sold Selling, general, and administrative expense Operating income $ 68 222 $ 33 125 $ 21 848 $ 13 249 Suppose that the cost of products sold is the only variable cost; selling, general and administrative expenses are fixed with respect to sales. Assume that Procter & Gamble had a 10% increase in sales in 2007 and that there was no change in costs except or increases associated with the higher volume of sales. Compute the predicted 2007 operating income for Procter & Gamble and its percentage increase. Explain why the percentage increase in income differs from the percentage increase in sales. Calculate also the percentage increase in contribution margin. See: Exercise_062_Proctor&Gamble