Morgan Technologies Sells a Single Product at $20 Per Unit

question 85

Multiple Choice

Morgan Technologies sells a single product at $20 per unit. The firm's most recent income statement revealed unit sales of 100,000, variable costs of $800,000, and fixed costs of $400,000. If a $4 drop in selling price will boost unit sales volume by 20%, the company will experience:

• A) no change in profit because a 20% drop in sales price is balanced by a 20% increase in volume.
• B) an $80,000 drop in profit.
• C) a $240,000 drop in profit.
• D) a $400,000 drop in profit.
• E) None of the answers is correct.