Advanced Enterprises Reports Year-End Information from 2018 as Follows

question 2

Multiple Choice

Advanced Enterprises reports year-end information from 2018 as follows:

Advanced is developing the 2019 budget.In 2019 the company would like to increase selling prices by 14.5%,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 Advanced increase the selling price in 2019?

• A)Yes,because operating income increases for 2019.
• B)Yes,because sales revenue increases for 2019.
• C)No,because sales volume decreases for 2019.
• D)No,because gross margin decreases for 2019.

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Definitions:

Environmental Regulations

Laws and policies aimed at protecting the environment by controlling pollution levels, waste management, and conservation efforts, impacting business operations and compliance costs.

Cost-Plus Pricing

A pricing strategy where the selling price is determined by adding a specific markup to a product's cost.

Absorption Costs

Absorption Costs involve all the costs associated with manufacturing a product, including direct labor, materials, and overhead, allocated to the product.

Mark-Up Percentage

Mark-up percentage is the ratio of profit added to the cost price to determine the selling price.