Answer the Following Questions Using the Information Below

question 206

Multiple Choice

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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Definitions:

Self-Control

A hypothetical construct referring to "will power" that involves two responses: (1) the target response to be controlled (e.g., eating, completing math problems, or throwing temper tantrums) and (2) the response emitted in order to control the rate of the target behavior (e.g., recording everything eaten, the number of math problems completed correctly, or the number of temper tantrums thrown during the day). Self-control is assumed to reflect an internal process that occurs without the presence of immediate and obvious external contingencies.

Reactivity

A phenomenon that results from the act of self-monitoring. Reactivity is said to occur when a behavior being monitored changes as a result of observing and recording it. Also known as the reactive effect.

Self-Monitoring

The process of observing and recording one's own behaviors, thoughts, or emotions to increase self-awareness or modify behavior.

Response Cost

A behavior modification technique where certain privileges or desired items are removed as a consequence of inappropriate behavior.