Answer the Following Questions Using the Information Below:
Kramer Enterprises

question 34

Multiple Choice

Answer the following questions using the information below:
Kramer Enterprises reports year-end information from 2015 as follows:
$\begin{array}{lr}\text { Sales (160,000 units) } & \$ 960,000 \\\text { Cost of goods sold } & 640,000\\\text { Gross margin } & 320,000 \\\text { Operating expenses } & 260,000 \\\text { Operating income }&\$60,000\end{array}$ Kramer is developing the 2016 budget. In 2016 the company would like to increase selling prices by 12.5%, and as a result expects a decrease in sales volume of 9%. All other operating expenses are expected to remain constant. Assume that cost of goods sold is a variable cost and that operating expenses are a fixed cost.
-Should Kramer increase the selling price in 2016?

• A) Yes, because operating income increases for 2016.
• B) Yes, because sales revenue increases for 2016.
• C) No, because sales volume decreases for 2016.
• D) No, because gross margin decreases for 2016.