Planners Have Determined That Sales Will Increase by 20% Next

question 2

Multiple Choice

Planners have determined that sales will increase by 20% next year, and that the profit margin will remain at 10% of sales.Which of the following statements is correct?

• A)Profit will grow by 20%
• B)The profit margin will grow by 10%
• C)Profit will grow proportionately faster than sales
• D)10% of the increase in sales will become net income

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Definitions:

Target-Return Pricing

Involves setting the price of a product based on the expected return on investment (ROI), aiming to meet a predefined profit goal.

Markup

Markup refers to the difference between the cost of a good or service and its selling price, expressed as a percentage of the cost.

Selling Price

The amount of money for which a product or service is sold to customers.

Skimming Pricing Strategy

A pricing strategy where a product is initially sold at a high price, which is gradually lowered to attract more price-sensitive customers.