Use the Information for the Question(s)below

question 56

Multiple Choice

Use the information for the question(s) below.
Glucose Scan Incorporated (GSI) currently sells its latest glucose monitor,the Glucoscan 3000,to diabetic patients for $129.GSI plans on lowering their price next year to $99 per unit.The cost of goods sold for each Glucoscan unit is $50,and GSI expects to sell 100,000 units over the next year.
-Suppose that if GSI drops the price on the Glucoscan 3000 immediately,it can increase sales over the next year by 30% to 130,000 units.The incremental impact of this price drop on the firm's EBIT is closest to:

• A)a decline of $1.5 million.
• B)an increase of $1.5 million.
• C)a decline of $2.4 million.
• D)an increase of $2.4 million.

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Definitions:

State Incorporation Statutes

Laws established by individual states that dictate how companies can legally incorporate and operate within that state.

S Corporation

A corporation that enjoys the tax status of a partnership.

Tax Status

A classification given to an individual or entity by a governmental authority that determines how they are taxed, which can include categories such as single, married, or corporation.

Domestic

Pertaining to or occurring within a particular country; not foreign or international.