In 2017, 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 2018, volume is expected to increase by 10%. Inflation will increase the sales price per unit by 3%, but production costs per unit will increase by 5%. In real dollars, expected gross profit for 2018 is
A) $44 million.
B) $45.32 million.
C) $48.2 0 million.
D) $50 million.

Question

Quizplus · Accepted Answer

In 2017, expected gross profit is $40 million (100,000 units x ($1,000 - $600)). In 2018, volume will increase by 10% to 110,000 units. The sales price per unit will increase by 3% to $1,030. Production costs per unit will increase by 5% to $630. Therefore, expected gross profit in 2018 is $45.32 million (110,000 units x ($1,030 - $630)).

In 2017, Sunny Electronics Expects to Sell 100,000 3-D Television