In 2010,Sunny Electronics expects to sell 100,000 3-D television sets for an average price of $1,000.Expected production costs are $600 per unit.In 2011,volume is expected to increase by 10%,while inflation will increase both the sales price and the cost per unit by 3%.In nominal dollars,expected gross profit for 2011 is:
A)$40 million.
B)$45.32 million.
C)$48.20 million.
D)$50 million.

Question

Quizplus · Accepted Answer

In 2010, gross profit is $100,000 * ($1,000 - $600) = $40 million. In 2011, volume increases by 10%, so sales are 110,000 units. Sales price and cost per unit both increase by 3%, so the new sales price is $1,000 * 1.03 = $1,030 and the new cost per unit is $600 * 1.03 = $618. Therefore, gross profit in 2011 is 110,000 * ($1,030 - $618) = $45.32 million.

In 2010,Sunny Electronics Expects to Sell 100,000 3-D Television Sets