Question

Because of his business's recent success, Sam has decided to expand his Sam's Swimming Pool Cleaning to include another branch. This will add expenses for another office and payroll for five more employees, but Sam's customer base will stay the same, at least for a while. Until Sam's new branch starts bringing in new customers, how will this change affect Sam's gross profit margin?
a.
An added expense of a new branch has nothing to do with Sam's gross profit margin.
b.
Since the new branch is adding expenses, Sam's gross profit margin will go down.
c.
Since the new branch is adding expenses, Sam's gross profit margin will go up.
d.
Since the expense the new branch is adding is negligible, Sam should see no change in his gross profit margin.

Answer 1

The correct answer here would be 
B.)Since the new branch is adding expenses, Sam's gross profit margin will go down.
It states in the question Sam has the same amount of customers he did when he had a smaller business. This leads me to believe, for the time being, his profit will decrease after he pays the expenses of his new building wing and employees.