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%, Inflation will increase the cost per unit by 3%, but to attract more buyers, Sunny will reduce the price to $950. In nominal dollars, expected gross profit for 2014 is
A) $45.32 million.
B) $40 million.
C) $38 million.
D) $36.52 million.

Question

Quizplus · Accepted Answer

In 2014, the expected sales volume is 110,000 units (10% increase from 100,000 units). The cost per unit will increase by 3% from $600 to $618 (3% of $600 is $18, so $600 + $18 = $618). The selling price is reduced to $950. The gross profit per unit is $950 - $618 = $332. The total expected gross profit for 2014 is 110,000 units * $332 = $36.52 million.

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