Elegant Dogs and Dogs Are Dazzling are competing canine grooming salons. Each co

Question

Elegant Dogs and Dogs Are Dazzling are competing canine grooming salons. Each company currently serves 4,500 customers per year. Both companies charge $35 to groom a dog. Elegant Dogs pays its dog groomers fixed salaries. Salary expense totals $45,000 per year Dogs Are Dazzling pays its groomers $10 per dog groomed. Elegant Dogs lures 2,000 customers from Dogs Are Dazzling by lowering its grooming price to $25. Dogs Are Dazzling maintains its $35 price. Which of the following is true? 11. a Profits at both cmpanies will decrease and Dogs Are Dazzling's profits will decrease net loss. b. Elegant Dog's rofits will increase c. Dogs Are Dazzling suffer a d. All the statements are false 12. At a sales level of $270,000, the magnitude of operating leverage for Donuts Unlimited is 2.8 If sales increase by 15%, profits will increase by: 2.8%. 15%. 42%. 28%. C. d.

Explanation / Answer

For last question information is incomplete.

Ans 11 Elegant dogs 4500 dogs 6500 dogs Sales 157500 162500 (4500*35) (6500*25) Costs 45000 45000 Net Income 112500 117500 Dazzling 4500 dogs 2500 Sales 157500 87500 (4500*35) (2500*35) Costs 45000 25000 Net Income 112500 62500 Option B Elegant dogs profit will increase and Dogs are dazzling profit will decrease ans 12 Profit Increases=Operating leverage*% increase in sales 2.8*15 42 %

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