Musgrave Corporation Has Fixed Operating Costs of R46,000 and Variable

question 86

Multiple Choice

Musgrave Corporation has fixed operating costs of R46,000 and variable costs that are 30% of the current sales price of R2.15.At a price of R2.15, Musgrave sells 40,000 units.Musgrave can increase sales by 10,000 units by cutting its unit price from R2.15 to R1.95, but variable cost per unit won't change.Should it cut its price?

• A) No, EBIT decreases by R6,000.
• B) No, EBIT decreases by R250.
• C) Yes, EBIT increases by R11,500.
• D) Yes, EBIT increases by R8,050.
• E) Yes, EBIT increases by R5,050.

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Definitions:

Profits

The financial gains obtained when the revenues generated from business activities exceed the expenses, costs, and taxes involved in sustaining the activities.

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Social Issues

Problems that influence a significant amount of individuals within a society, encompassing topics like poverty, education, and health care.

Retail Setting

Refers to the environment or physical space where goods and services are offered for sale to consumers.