ACCT 3309 Exam III Ver B FALL,2017 10. Dennis\' TV currently sells small televis

Question

ACCT 3309 Exam III Ver B FALL,2017 10. Dennis' TV currently sells small televisions for $180. It has costs of $140. A competitor is bringing a new small television to market that will sell for $150. Management believes it must lower the price to $150 to compete in the market for small televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Dennis' sales are currently 100,000 televisions per year. What is the change in profit margin if Marketing is correct and only the sales price is changed? A) $1,100,000 B) $300,000 C) $(1,100,000) D) $(2,900,000) to 4100, 0 00c ,ooo, ooo 11. An example of a direct cost for a service provided by an accountin wouled ha.

Explanation / Answer

10. D) (29,00,000)

Therefore new profit margin is less than the old profit margin by $29,00,000 if the sales price is changed.

old new Sales volume                        1,00,000             1,10,000 Sales price                                  180                       150 Cost                                  140                       140 Profit margin per unit                                    40                         10 Profit margin                      40,00,000           11,00,000

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