Question
Violet Sales Corp, reports the year-end information from 2019 as follows: Sales (35,625 units) - $285,000 Cost of Goods Sold- 116,000 Gross Margin- 169,000 Operating
- Violet Sales Corp, reports the year-end information from 2019 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 2020 budget. In 2020 the company would like to increase selling prices by 3%, and as a result expects a decrease in sales volume of 12%. 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 2020? Show all calculations and explain your reasoning.
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