Answer the following questions using the information below:
Basim Enterprises reports the year-end information from 2014 as follows:
Basim is developing the 2015 budget. In 2015 the company would like to increase selling prices by 4%, and as a result expects a decrease in sales volume of 10%. All other operating expenses are expected to remain constant. Assume that COGS is a variable cost and that operating expenses are a fixed cost.
-Should Basim increase the selling price in 2015?

Question

Answer the following questions using the information below:
Basim Enterprises reports the year-end information from 2014 as follows:
  Basim is developing the 2015 budget. In 2015 the company would like to increase selling prices by 4%, and as a result expects a decrease in sales volume of 10%. All other operating expenses are expected to remain constant. Assume that COGS is a variable cost and that operating expenses are a fixed cost.
-Should Basim increase the selling price in 2015?

Quizplus · Accepted Answer

Increasing the selling price could lead to a decrease in gross margin if the cost of goods sold increases or if the higher price leads to reduced sales volume, affecting profitability.

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