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Proctor & 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
Proctor & 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 2008 income statement showed the following (in millions): Net Sales $83, 503 Costs of products sold 40, 695 Selling, general, and administrative expenses 25,725 Operating income $17, 083 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 20% decrease in sales in 2009 and that there was no change in costs except for decreases associated with the lower volume of sales. Compute the predicted 2009 operating income for Proctor & Gamble and its percentage decrease. Explain why the percentage decrease in income differs from the percentage decrease in sales
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