The sales department tells management that they can increase revenue by 20 percent by increasing sales 20 percent. However, the scheduling department says that to achieve that number of hours, they will have to buy an upgraded computer software program for $200,000 that will allow for better scheduling of staff hours between engagements. Management says that there is no need for a new computer program because to increase capacity and keep the contribution margin and price the same, they can increase capacity by hiring more consultants. Because they are constantly adding new consultants, there are no incremental hiring costs. What happens to profits when we enter a new total number of hours sold to reflect the increase into our model? What happens to the risk at BAH vs. Comfy Chair--do you think the strategy of hiring more consultants rather than investing in new equipment is a higher or lower risk than Comfy Chair's strategy of investing in equipment?
a. Profits increase 63.5 percent, and BAH risk is higher.
b. Profits increase 22.4 percent, and BAH risk is lower.
c. Profits increase 38.2 percent, and BAH risk is higher.
d. Profits increase 38.2 percent, and BAH risk is lower.