Should Violet increase the selling price in 2016?
Violet Sales Crop, reports the year-end information from 2016 as follows:
Sales (35,375 units).......................$283,000
Cost of goods sold.........................108,000
Gross margin................................175,000
Operating expenses.........................157,000
Operating income............................18,000
Violet is developing the 2016 budget. In 2016 the company would like to increase selling prices by 4.5%, 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.
a. No, because operating decreases for 2016
b. Yes, because gross margin increase for 2016
c. No, because sales volume decreases for 2016
d. Yes, because sales revenue increases for 2016