The sales department tells management that they can increase revenue by 20 percent by increasing sales 20 percent, but the production department says that to achieve that number of units, they will have to buy a new piece of equipment for $200,000. What happens when we enter those changes into our model? (Enter a new number in Enter Units that reflects a 20% increase in chairs sold. Increase Manufacturing Machinery to allow for the new purchase.) Clearly, a 20 percent increase in sales will increase revenue 20 percent, but what happens to profits?
a. Profits decrease 25 percent.
b. Profits increase 41 percent.
c. Profits decrease 41 percent.
d. Profits do not change.