Solution:
Req. A
Required B.
We can check it with the help of operating leverage as follows:
Operating leverage of GREENBACK STORE = CM / operating profit
= $283,500 /$170,100
= 1.6667 times
and Operating leverage of ONE-MART = $441,000 / 170,100 = 2.5926 times
So, Increase in profit of Greenback store = Old profit × percentage change in profit
= $170,100×(%change in sales× Op. leverage)
= $170,100 × 15%×1.6667
= $42,525
and Increase in profit of One-Mart by = $170,100×15%×2.5926 = $166,150
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