Final answer:
The amount of sales revenue Sutton will report is calculated using the formula Total Revenue = Price × Quantity. This takes into account the quantity sold and the product's selling price, which is influenced by the prevailing market price in a perfectly competitive market.
Step-by-step explanation:
To determine the amount of sales revenue Sutton will report on the first 2015 quarterly pro forma income statement, the correct formula would be Total Revenue = Price x Quantity. This calculation is performed by multiplying the selling price of the product by the quantity sold.
For example, if Sutton sold five units at a price of $25 per unit, the total revenue would be 5 units × $25 per unit = $125 in sales revenue. In a perfectly competitive market, the total revenue can be influenced by the quantity produced and the prevailing market price. It's essential for the business to cover both variable and fixed costs to avoid losses and maximize profits.