Explanation

To solve this problem, we need to:

1. Calculate EBIT margins for all companies

   • Apex Inc.: EBIT margin = 20/200 = 10.0%
   • Competitor 1: EBIT margin = 150/500 = 30.0%
   • Competitor 2: EBIT margin = 120/370 = 32.4%
   • Competitor 3: EBIT margin = 100/450 = 22.2%

2. Find the peer median EBIT margin

   • Peer margins: 30.0%, 32.4%, 22.2%
   • Sorted: 22.2%, 30.0%, 32.4%
   • Median = 30.0%

3. Calculate target EBIT for Apex

   • Target EBIT = Revenue × Peer median margin = 200 × 30.0% = $60 million

4. Calculate required EBIT increase

   • Current EBIT = $20 million
   • Required increase = 60 - 20 = $40 million

5. Calculate operating cost savings needed

   • Since EBIT = Revenue - Operating Costs
   • To increase EBIT by $40 million, operating costs must decrease by $40 million
   • Therefore, required cost savings = $40 million

Wait, this gives us $40 million, which corresponds to option C. But let me verify the calculation:

Current situation:

• Revenue: $200 million
• EBIT: $20 million
• Operating costs: $180 million

Target situation:

• Revenue: $200 million (unchanged)
• EBIT: $60 million (30% margin)
• Operating costs: $140 million

Required cost savings: $180 - $140 = $40 million

This matches option C ($40), not option B ($36). Let me double-check the median calculation:

Competitor margins: 30.0%, 32.4%, 22.2% Sorted: 22.2%, 30.0%, 32.4% Median = 30.0% ✓

Target EBIT = 200 × 30% = $60 million ✓ Required increase = 60 - 20 = $40 million ✓ Cost savings = $40 million ✓

Therefore, the correct answer should be C. 40.