Answer the following questions using the information below:
Ernie Shavers, Inc. manufactures electric shavers and is considering decreasing the price by $3 a unit for the coming year. With a $3 price decrease, the unit demand is expected to increase by 25%, and a high volume materials discount is expected to decrease the variable costs per unit by $1 per unit.

-Would you recommend the $3 price decrease?
A)Yes, because demand increases.
B)No, because the selling price decreases.
C)No, because operating income decreases.
D)Yes, because contribution margin per unit increases.

Question

Answer the following questions using the information below:
Ernie Shavers, Inc. manufactures electric shavers and is considering decreasing the price by $3 a unit for the coming year. With a $3 price decrease, the unit demand is expected to increase by 25%, and a high volume materials discount is expected to decrease the variable costs per unit by $1 per unit.
 
-Would you recommend the $3 price decrease?
A)Yes, because demand increases. 
B)No, because the selling price decreases. 
C)No, because operating income decreases. 
D)Yes, because contribution margin per unit increases.

Quizplus · Accepted Answer

The Answer of Answer the following questions using the information below:
Ernie Shavers, Inc. manufactures electric shavers and is considering decreasing the price by $3 a unit for the coming year. With a $3 price decrease, the unit demand is expected to increase by 25%, and a high volume materials discount is expected to decrease the variable costs per unit by $1 per unit.
 
-Would you recommend the $3 price decrease?
A)Yes, because demand increases. 
B)No, because the selling price decreases. 
C)No, because operating income decreases. 
D)Yes, because contribution margin per unit increases.

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