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%,Inflation will increase the cost per unit by 3%,but to attract more buyers,Sunny will reduce the price by 5%.In real dollars,expected gross profit for 2011 is:
A)$45.32 million.
B)$40 million.
C)$38 million.
D)$36.52 million.

Question

Quizplus · Accepted Answer

In 2010, expected gross profit is $100,000 * ($1,000 - $600) = $40 million. In 2011, volume increases by 10%, so units sold = 110,000. Cost per unit increases by 3%, so cost per unit = $600 * 1.03 = $618. Price per unit decreases by 5%, so price per unit = $1,000 * 0.95 = $950. Therefore, expected gross profit in 2011 is 110,000 * ($950 - $618) = $45.32 million.

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