Pattimore Inc

question 72

Multiple Choice

Pattimore Inc. sells a single product at $30 per unit. The firm's most recent income statement revealed unit sales of 200,000, variable costs of $900,000, and fixed costs of $3,500,000. If a $6 drop in selling price will boost unit sales volume by 30%, Pattimore will experience:

• A)no change in profit because a 20% drop in sales price is balanced by the 30% increase in volume.
• B)a $30,000 drop in profitability.
• C)a $1,200,000 drop in profitability.
• D)a $1,530,000 increase in profitability.
• E)a $1,570,000 drop in profitability.

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Definitions:

Cost Of Goods Sold

The immediate expenses directly related to creating a company's sold products, covering both labor and materials costs.

Ending Inventory

The total value of goods available for sale at the end of an accounting period, after all sales and purchases have been accounted for.

Accounting Period

A specific time frame for which financial statements are prepared, to measure the performance and financial position of a business.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from revenue, indicating the company's financial performance over a specific period.