Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your firm's sales are estimated to decrease by 10% in the next year. However, soon after the beginning of the year it becomes apparent that

Your firm's sales are estimated to decrease by 10% in the next year. However, soon after the beginning of the year it becomes apparent that the reduction in sales is more likely to be 20%. If your cost of good sold consists of only fixed expenses, which of the following situations would you expect to be TRUE?

A. The percentage negative change in gross profit should be greater than the percentage change in sales.

B. The percentage change in gross profit should be zero because gross profit is not a function of sales if all CGS are fixed.

C. The percentage change in gross profit should be the same as the percentage change in sales.

D. The percentage negative change in gross profit should be less than the percentage change in sales.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Finance questions

Question

List behaviors to improve effective leadership in meetings

Answered: 1 week ago