Use the Information for the Question(s)below

question 80

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.Also suppose that for each Glucoscan monitor sold,GSI expects additional sales of $100 per year on glucose testing strips and these strips have a gross profit margin of 75%.Considering the increase in the sale of testing strips,the incremental impact of this price drop on the firm's EBIT is closest to:

• A)a decline of $1.5 million.
• B)a decline of $0.7 million.
• C)an increase of $0.7 million.
• D)an increase of $1.5 million.

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