Block Island TV currently sells large televisions for $380. It has costs of $320. A competitor is bringing a new large television to market that will sell for $360. Management believes it must lower the price to $360 to compete in the market for large televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Block Island TV sales are currently 150,000 televisions per year.
What is the change in operating income if marketing is correct and only the sales price is changed?
A) $6,600,000
B) $3,000,000
C) $(6,600,000)
D) ($2,400,000)

Question

Quizplus · Accepted Answer

(165,000 x (360 - 320)) - (150,000 x (380- 320)) = $(2,400,000)

Block Island TV Currently Sells Large Televisions for $380