Eve's Emporium Sells Three Products Which Have the Following Characteristics

question 18

Multiple Choice

Eve's Emporium sells three products which have the following characteristics: $\begin{array}{c}\begin{array}{ll}\\\text { Product } & \text { Sales Mix } \\\text { P }& 60,000 \text { units } \\\text {Q} & 40,000 \text { units } \\\text {R} & 20,000 \text { units }\end{array}\begin{array}{cc}\text { Unit} &\text { Unit Variable }\\\underline{\text { Price }}&\underline{\text { Cost }}\\\$40&\$ 20 \\60 & 30 \\30 & 15\end{array}\end{array}$ If Eve can change the sales mix from 60,000 P, 40,000Q, and 20,000 R to 70,000 P, 45,000 Q, and 20,000 R, pre-tax profit will be:

• A) lower.
• B) higher.
• C) unchanged.
• D) cannot be determined.

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Definitions:

Price Level

A measure of the average price of goods and services in an economy at a given time, often used to discuss inflation or deflation.

Recession

A notable downturn in economic performance affecting the entire economy and persisting for several months.

Aggregate Demand

The sum of all expenditures on goods and services in an economy, inclusive of private and public spending, investments, and exports minus imports, within a specific timeframe.

Aggregate Demand

The entire appetite for goods and services across an economy, quoted at a chosen price level, during a determined timeframe.