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Bonnie and Clyde started the BC Restaurant a few years ago. They rented a building, bought ...

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Bonnie and Clyde started the BC Restaurant a few years ago. They rented a building, bought ...

Bonnie and Clyde started the BC Restaurant a few years ago. They rented a building, bought equipment, and hired two employees to work full time at a fixed monthly salary. Utilities and other operating charges remain fairly constant during each month.
During the past two years the business has grown with average sales increasing one percent a month. This situation pleases both Bonnie and Clyde, but they do not understand how sales can grow by one percent a month while profits are increasing at an even faster pace. They are afraid that one day they will wake up to increasing sales but decreasing profits.

Required:
Explain why the profits have increased at a faster rate than sales.

Textbook

Cost Accounting: A Managerial Emphasis, Canadian Edition

Edition: 7^th

Authors: Horngren, Datar, Rajan, Beaubien

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