Advanced Enterprises reports yearminus?end information from 2018 as? follows: ?(
ID: 2525221 • Letter: A
Question
Advanced Enterprises reports
yearminus?end
information from 2018 as? follows:
?(161 comma 250161,250
$ 967 comma 000$967,000
Cost of goods sold
645 comma 000645,000
Gross margin
322 comma 000322,000
Operating expenses
264 comma 000264,000
Operating income
$ 58 comma 000$58,000
Advanced is developing the 2019 budget. In 2019 the company would like to increase selling prices by
12.512.5?%,
and as a result expects a decrease in sales volume of
99?%.
All other operating expenses are expected to remain constant. Assume that cost of goods sold is a variable cost and that operating expenses are a fixed cost.
Should Advanced increase the selling price in? 2019???
Explanation / Answer
Answer:
yes, Advanced Should increase the selling price in? 2019
Explanation to the answer
Sale units 161,250*91%
146737.5
new selling price
(967000/161250)*112.5%
6.75
Sales (146737.5*6.75)=
989966.25
variable cost (146737.5*(645000/161250)=
586950
gross margin
403016.25
operating expense
264000
operating income
139016.25
As we can see that there is increase in operating income so Advanced Should increase the selling price in? 2019
Sale units 161,250*91%
146737.5
new selling price
(967000/161250)*112.5%
6.75
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