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Advanced Enterprises reports year-end information from 2019 as follows: Sales (161,250 units) $967,000 Cost of goods sold (645,000) Gross margin 322,000 Operating expenses (264,000) Operating
Advanced Enterprises reports year-end information from 2019 as follows:
Sales (161,250 units) | $967,000 |
Cost of goods sold | (645,000) |
Gross margin | 322,000 |
Operating expenses | (264,000) |
Operating income | $58,000 |
Advanced is developing the 2020 budget. In 2020 the company would like to increase selling prices by 12.5%, and as a result expects a decrease in sales volume of 9%. 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 2020?
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