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I can't find the complete or same question on the internet but I did find a similar question which is as under:
Sales Revenues = $80,000
Profit Margin = 15%
Pretax Earnings = $12,000
How much would Sales/Marketing need to increase Sales to have the same effect as decreasing COGS by $1500?
Answer:
$10,000 increase in sales is required.
Explanation:
Here, we are given pretax earnings of $12,000 which is 15% of total sales of $80,000.
The reduction in cost of goods sold by $1500 will increase the pretax earnings to $13500. Now again, it is 15% of the total sales because we are finding new sales required that would increase the pretax earnings to $13,500.
So this implies that:
$13,500 is 15% of New Total Sales
Mathmatically,
$13,500 = 15% * New Total Sales
New Total Sales = $13,500 / 15%
New Total Sales = $90,000
Hence the additional sales required = New Total Sales - Previous Total Sales
Additional Sales Required = $90,000 - $80,000
= $10,000
We are given that the profit margin is 15% which means:
Sales (100%) - Cost (85%) = Profit (15%)
If the Profit Increase given is $1500 then the sales required for this increase would be:
Sales required = $1500 / 15% = $10,000
The sales should be increased by $28,000.
Sales refers to the transaction of buying and selling of goods or services between the buyer and the seller. The profit that arises from the sale of a good is the difference between the sale value and the cost.
The decrease in COGS ultimately increases the profit. Given that the COGS has decreased by $1,400, hence the pretax profit will increase by $1,400.
The increase in sale to increase the profit by $1400 will be:
[tex]\rm Increase\:in\:sale =\dfrac {Increase\:in\:profit }{Profit \:margin}\\\\\rm Increase\:in\:sale =\dfrac{1,400}{5\%}\\\\\rm Increase\:in\:sale =\$28,000[/tex]
Therefore the sale needs to be increased by $28,000.
Learn more about sales here:
https://brainly.com/question/16911495
