Procter & Gamble Company is a Cincinnati-based company thatproduces household products under brand names such as Gillette, Bounty, Crest, Folgers, and Tide. The company's 2006 income statement showed the following (in millions):
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Net Sales
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$68,222,000
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Cost of Products Sold
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$33,125,000
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Selling, general, and administrative expense
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$21,848,000
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Operating Income
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$13,249,000
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Suppose that the cost of products sold is the only variable cost; selling, general, and administrative expenses are fixed withrespect to sales. Assume that Procter & Gamble had a 10%increase in sales in 2007 and that there was no changein costsexcept for increases associated with the higher volume of sales. Compute the predicted 2007 operating income for Procter &Gamble and its percentage increase. Explain why the percentage increase in income differs from the percentage increase in sales.