Sales $510 Cost of outsourced facilitating goods Cost of in-house services provided 210 199 Administrative costs 77 Pretax earnings 24

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A service company has the following financial information (in millions of $)
a. What is the profit leverage effect of reducing the cost of the facilitating goods in this company?
b. It has been suggested that the in-house services costs could be reduced by 10 percent in the coming year by implementing lean systems. What effect would thiso
have on earnings increase in percentage?
c. What is the profit leverage effect of in-house services relative to profits?

Sales
$510
Cost of outsourced facilitating goods
Cost of in-house services provided
210
199
Administrative costs
77
Pretax earnings
24
Transcribed Image Text:Sales $510 Cost of outsourced facilitating goods Cost of in-house services provided 210 199 Administrative costs 77 Pretax earnings 24
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