Which of the following scenarios accurately reflects the meaning of the profit leverage effect? Group of answer choices With a 7.6% profit margin, decreasing your cost of goods sold (COGS) by $10,000 increases your pre-tax profits by $10,000, but increasing your sales by $10,000 only increases your pre-tax profits by $760. When operating with a 7.6% profit margin, your cost of goods sold will be $10,000 as long as your sales exceed $10,000. With a 7.6% profit margin, every additional $10,000 in sales increases your pre-tax profits by $10,000, while every $10,000 saved in purchasing increases your pre-tax profits by just $760. If your profit margin is 7.6%, every $10,000 saved in purchasing lowers your COGS sold by $760.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Which of the following scenarios accurately reflects the meaning of the profit leverage effect?

Group of answer choices

With a 7.6% profit margin, decreasing your cost of goods sold (COGS) by $10,000 increases your pre-tax profits by $10,000, but increasing your sales by $10,000 only increases your pre-tax profits by $760.

When operating with a 7.6% profit margin, your cost of goods sold will be $10,000 as long as your sales exceed $10,000.

With a 7.6% profit margin, every additional $10,000 in sales increases your pre-tax profits by $10,000, while every $10,000 saved in purchasing increases your pre-tax profits by just $760.

If your profit margin is 7.6%, every $10,000 saved in purchasing lowers your COGS sold by $760.

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