Violet Sales Corp, reports the year-end information from 2018 as follows:

Violet is developing the 2019 budget. In 2019 the company would like to increase selling prices by 3.5%, 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.
Should Violet increase the selling price in 2019?

Question

Violet Sales Corp, reports the year-end information from 2018 as follows:

Violet is developing the 2019 budget. In 2019 the company would like to increase selling prices by 3.5%, 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.
Should Violet increase the selling price in 2019?

Quizplus · Accepted Answer

$253,678.50 - $99,760.00 = $153,918.50 (Gross margin); $153,918.50 - $154,000 = -$81.50 (Operating income). No, because there would be a decrease in operating income compared to 2019.

Violet Sales Corp, Reports the Year-End Information from 2018 as Follows