Answer the Following Questions Using the Information Below:
Kramer Enterprises

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.