Use the Information for the Question(s)below

question 56

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.The incremental impact of this price drop on the firm's EBIT is closest to:

• A)a decline of $1.5 million.
• B)an increase of $1.5 million.
• C)a decline of $2.4 million.
• D)an increase of $2.4 million.

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Definitions:

Overhead Costs

Expenses related to the day-to-day running of a business that cannot be directly linked to any specific business activity or product.

Departments

Divisions within an organization, each focusing on a specific area of function, such as sales or human resources.

Products

Products are items or services created through a process and made available for consumer purchase or use, serving identified market needs or desires.

Production Department

A unit or section within a company responsible for the actual production of goods or services.