Question

The salesforce sold $30M in additional products; purchasing negotiated $10M in material costs savings.
If operating profit is 12%, how did their impacts on operating profit compare?

Answer 1

Answer:

The purchasing department increased operating profits by almost three times the amount that the additional sales generated.

Explanation:

The sale of $30 million in additional products generated $3.6 million in additional operating profits (= $10 million x 12%).

But the savings generated by the purchasing department increased operating profits by $10 million, which is almost three times the amount that the additional sales generated: $10 million vs. $3.6 million.