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What would be the impact on net income before taxes

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Assume Adams Distributors' Operating Expenses are essentially fixed-that is, they will not change significantly in the case of either an increase or decrease in sales. Assume also that competition prevents Adams from increasing its prices and also from finding cheaper goods to sell, so that the Gross Profit ratio (percentage) is also fixed constant at any level of sales.

Question 1. Suppose the 20% increase in Net Sales was achieved by spending an additional $5,000 on advertising, what would be the impact on net income before taxes?

Reference no: EM132573386

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