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g The following information is from​ Megabux, Inc.'s annual report for the years ended December​ 31: 2012 2011 2010 Sales ​$120,000 ​$110,000 ​$100,000 Cost of goods sold ​58,000 ​52,000 ​46,000 Operating expenses ​48,000 ​44,000 ​42,000 Interest expense ​12,000 ​9,000 ​6,000 Net income ​$ ​ 2,000 ​$ ​ 5,000 ​$ ​ 6,000 Refer to the Megabux annual report above. Which of the following describes the trend in the profit margin ratio for the three−year ​period? A. There is no significant change in the ratio over the three years. B. The ratio is getting worse because expenses are growing faster than sales. C. The ratio is getting worse because Megabux has increased its selling prices. D. The increase in sales each year is more than enough to cover the increase in expenses.

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Answer:

B. The ratio is getting worse because expenses are growing faster than sales.

Step-by-step explanation:

OPERATING EXPENSES-COST TABLE

2012 2011 2010

Operating exp 48,000 44,000 42,000

Interest expense 12,000 9,000 6,000

TOTAL 60,000 53,000 48,000

As can be clearly seen above that operating expenses having been increasing at a very high speed as compared to sales volumes and gross profits hence, leading to a fall in overall profitability.

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