Tversky and Co. have devised a new psychological test for investors' risk tolerance. They expect to sell 10,000 tests in the first year at $150 each. Cash costs associated with producing, administering and scoring the test are $50 per unit
In the second year, volume is expected to be the same, but both the price and the costs will increase 2.5%. Forecast gross profit in the second year.
Answer:
Revenue 10,000 units × $150 × 1.025 = $1,537,500
Cash Costs 10,000 units × $50 × 1.025 = 512,500
Gross Profit $1,025,000
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