In 2019, Master Computer expects to sell 100,000 computers for an average price of $1000.Expected production costs are $600 per unit.In 2020, volume is expected to increase by 10%, while inflation will increase both the sales price and the cost per unit by 3%.In nominal dollars, expected gross profit for 2020 is [blank].
A)$40 million
B)$45.32 million
C)$48.20 million
D)$50 million

Question

Quizplus · Accepted Answer

In 2020, the expected sales volume is 110,000 units (a 10% increase from 100,000). With a 3% inflation on the sales price, the new average price per unit becomes $1030 ($1000 * 1.03). The production cost per unit also increases by 3% to $618 ($600 * 1.03). The gross profit per unit for 2020 is therefore $1030 - $618 = $412. The total expected gross profit for 2020 is $412 * 110,000 = $45.32 million.

In 2019, Master Computer Expects to Sell 100,000 Computers for an Average