Question

If a company has fixed costs and is operating above the breakeven point, when sales increase by 15%, profits will:

a. increase by less than 15%
b. increase by 15%
c. increase by more than 15%
d. decrease by less than 15%

Answer 1

I am thinking that the answer is c because if the company is operating above its breakeven point and the fixed costs are constant then the profits should increase by more than 15% since they aren't receiving any additional costs.