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Question
Musgrave Corporation has fixed operating costs of $46,000 and variable costs that are 30% of the current sales price of $2.15. At a price of $2.15, Musgrave sells 40,000 units. Musgrave can increase sales by 10,000 units by cutting its unit price from $2.15 to $1.95, but variable cost per unit won't change. Should it cut its price?
a. No, EBIT decreases by $6,000.
b. No, EBIT decreases by $250.
c. Yes, EBIT increases by $11,500.
d. Yes, EBIT increases by $8,050.
e. Yes, EBIT increases by $5,050.
Answer
This answer is hidden. It contains 399 characters.
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