Problem #1 Assume that in the first scenario COGS is 75% of sales (which means your profit margin will be 25%) The first scenario assumes no change occurs, either in reduction in costs or in S&A and sales promotions. In scenario 2, you reduce your original costs by 5% through improvements in purchasing. However, S&A increase by $2 million. In scenario 3, you increase promotional expenses by 10% from a starting point of $30 million, resulting in a 15% increase in sales revenues. S&A increase by $5 million. Scenario 3 Scenario 1 Scenario 2 $500 million $500 million $ million Annual sales: 75 COGS (0% ): million $ million million $ million million $ million $ Gross Profit million $30 million $30 million Promotional Expenses million million $ $3 million Sales/Administration million $ million millionS Total profit before taxes: $ Understanding that sales increased dramatically in scenario 3 (but your COGS did not improve over the original scenario) what would you say are the implications for purchasing agents from this chart