Violet Sales Corp, reports the yearminusend information from 2018 as follows: Sa
ID: 2589667 • Letter: V
Question
Violet Sales Corp, reports the
yearminusend
information from 2018 as follows:
Sales (35,625 units)
$285,000
Cost of goods sold
116,000
Gross margin
169,000
Operating expenses
154,000
Operating income
$15,000
Violet is developing the 2019 budget. In 2019 the company would like to increase selling prices by 3.5%, and as a result expects a decrease in sales volume of 14%. 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 Violet increase the selling price in 2019?
A.
Yes, because sales revenue increases for 2019.
B.
Yes, because gross margin increases for 2019.
C.
No, because sales volume decreases for 2019.
D.
No, because operating income decreases for 2019.
Sales (35,625 units)
$285,000
Cost of goods sold
116,000
Gross margin
169,000
Operating expenses
154,000
Operating income
$15,000
Explanation / Answer
Sales 253679 =285000*0.86*1.035 Cost of goods sold 99760 =116000*0.86 Gross margin 153919 Operating expenses 154000 Operating income -82 ?No, because operating income decreases for 2019.
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