You are reviewing the quarterly forecast for a mid-sized industrial components business after a sudden market price drop in one of its core product lines. Your CFO wants to know how much of the revenue decline can be offset by higher unit volume and whether the change will compress gross margin enough to alter the full-year outlook. You have one quarter of actuals and a simple pricing sensitivity from the commercial team.
| Metric | Amount |
|---|---|
| Q3 units sold | 1,200,000 |
| Q3 average selling price per unit | $4.50 |
| Q3 variable manufacturing cost per unit | $2.70 |
| Q4 expected unit volume if price stays flat | 1,150,000 |
| Expected market price decline in Q4 | 8% |
| Volume uplift for every 1% price decline | 0.6% |
| Fixed operating expenses per quarter | $1,250,000 |
How would you assess the impact of the market change on Q4 revenue, gross profit, and operating profit? What would you recommend if management is deciding whether to hold price or match the market?
