In 2013,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 2014,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 2014 is
A)$40 million.
B)$45.32 million.
C)$48.20 million.
D)$50 million.

Question

Quizplus · Accepted Answer

In 2013, expected gross profit is $100,000 * ($1,000 - $600) = $40 million. In 2014, volume is expected to increase by 10%, so sales will be 110,000 units. The sales price and cost per unit will both increase by 3%, so the new sales price will be $1,000 * 1.03 = $1,030 and the new cost per unit will be $600 * 1.03 = $618. Therefore, expected gross profit for 2014 is 110,000 * ($1,030 - $618) = $45.32 million.

In 2013,Sunny Electronics Expects to Sell 100,000 3-D Television Sets