The sales department tells management that they can raise revenue by 20 percent by increasing sales 20 percent, but production department says that to attain that number of units, they will have to purchase a new piece of equipment that will add $200,000 to the appropriate category. What takes place when we enter those changes in our model? (Enter new number in Enter Units which reflects a 20 percent raise in chairs sold. Increase Manufacturing Machinery to allow for the new purchase.) Clearly, a 20 percent raise in sales will increase revenue 20 percent, but what takes place to profits?
a. Profits decrease 25 percent.
b. Profits increase 41 percent.
c. Profits decrease 41 percent.
d. Profits do not change.