A retailer attempting to improve its selling efficiency from 60 percent to 70 percent reduced its selling expense budget from $400,000 to $300,000.However,its new selling efficiency was reduced to 50 percent.What happened?
A)Sales decreased from $1,000,000 to $500,000.
B)Sales decreased from $1,000,000 to $600,000.
C)Sales decreased from $1,000,000 to $700,000.
D)Sales increased from $1,000,000 to $1,250,000.

Question

Quizplus · Accepted Answer

The retailer's original sales level was $1,000,000 (60% of selling efficiency). They reduced their selling expenses from $400,000 to $300,000 in an attempt to improve selling efficiency to 70%. However, their new selling efficiency was only 50%. To calculate the new sales level:
New sales level = (New selling efficiency / Original selling efficiency) x Original sales level
New sales level = (50% / 60%) x $1,000,000
New sales level = $833,333
This is a decrease from the original sales level of $1,000,000. Therefore, the best choice is B, "Sales decreased from $1,000,000 to $600,000."

A Retailer Attempting to Improve Its Selling Efficiency from 60