Question

Using the same information from question No. 4, what would the company's new Profit (before tax) be expressed in percent with the proposed 6% reduction in purchases? (5 pts) Element Impact Reducing Purchases Impact Increasing Revenue Organization's Revenue $ 3,500,000 USD Purchases $ 2,800,000 USD Profit (before tax) $ 175,000 USD Pct Reduction in Purchases / Pct Increase in Revenue 6% New Profit Level ($) 7 New Profit (before tax) in percent after purchase reduction 9696 596 9.8% O None of the above

Answer 1

First of all we have to find out the operating expenses as per the current situation
Organization's Revenue	$               3,500,000
Less:Purchases	$               2,800,000
Less:Profit	$                  175,000
Operating expenses	$                  525,000
Now based on the same operating expense we have to find out the New Profit
Organization's Revenue	$               3,500,000
Less:Purchases($2,800,000*0.94)	$               2,632,000
Less:Operating expenses	$                  525,000
Profit	$                  343,000
Profit in percentage =[($343,000 / $3,500,000)*100] =9.8%
So Option C is answer