Answer (D) is correct . Given a 15% decrease in prices, Year 2 sales were 85% of Year 2 sales at Year 1 prices. Hence, Year 2 sales at Year 1 prices equal $1,118,118 ($950,400 ÷ 85%). Sales and gross profit were $167,718 ($1,118,118 – $950,400) lower because of the decrease in prices.
Answer (A) is incorrect because Year 2 sales minus 85% of Year 1 sales equals $134,400. Answer (B) is incorrect because Year 2 sales minus 85% of Year 2 sales equals $142,560. Answer (C) is incorrect because The amount of $144,000 equals 15% of Year 1 sales.
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