Briefly describe how it is possible for a small change in the cost of purchased goods|Essay guru

Posted: January 30th, 2023

Briefly describe how it is possible for a small change in the cost of purchased goods and services to have a more significant effect on profits than a large change in sales

SOLUTION

A small change in the cost of goods and services can have a more significant effect on profits than a large change in sales if the margin of profit is small. This is because the cost of goods and services is subtracted from sales to determine profit, and a small increase in costs can result in a larger decrease in profit compared to a large increase in sales. Additionally, if fixed costs such as overhead remain constant, a small change in sales may not significantly impact profit, but a change in costs will.