Axia College of University of Phoenix (UoP)
Introduction to Management Accounting: Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008).
Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson- Prentice Hall.
Net sales $68,222
Costs of products sold 33,125
Selling, general, and administrative expense 21,848
Operating income $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 for 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. SOLUTION
