Question

Abercrombie​ & Fitch, once the favorite of loyal​ teens, is considering lowering prices on all items it sells in an effort to win them back after several years of sales declines.​ A&F's total sales were ​$6 billion last​ year, but they have been declining in the face of a weak economy and an intensively competitive retail environment. Price reductions are often effective in increasing​ sales, but marketers need to analyze how much sales must go up before a price reduction pays off and increases revenue enough to make the it worth doing. Assuming​ A&F's gross profit margin is 45 percent and cost of goods sold represents the only variable​ cost, by how much must sales increase to maintain the same gross profit margin in terms of absolute dollars if​ A&F lowers prices by 10 ​percent? The new gross margin percentage in decimal form equals?

Answer 1

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if we do rounding and go for 2 decimals, it will be = 0.39