Why the percentage increase in income differs

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Reference no: EM13258409

Procter & Gamble Company is a Cincinnati-based company thatproduces household products under brand names such as Gillette, Bounty, Crest, Folgers, and Tide. The company's 2006 income statement showed the following (in millions):

Net Sales	$68,222,000
Cost of Products Sold	$33,125,000
Selling, general, and administrative expense	$21,848,000
Operating Income	$13,249,000

Suppose that the cost of products sold is the only variable cost; selling, general, and administrative expenses are fixed withrespect to sales. Assume that Procter & Gamble had a 10%increase in sales in 2007 and that there was no changein costsexcept for increases associated with the higher volume of sales. Compute the predicted 2007 operating income for Procter &Gamble and its percentage increase. Explain why the percentage increase in income differs from the percentage increase in sales.

Reference no: EM13258409

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