Answer the Following Questions Using the Information Below:
Laver Shavers

question 140

Multiple Choice

Answer the following questions using the information below:
Laver Shavers manufactures electric shavers and is considering decreasing the price by $2.50 a unit for the coming year.With a $2.50 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.
$\begin{array}{lrr}&\text { Currently } & \text { Projected } \\\text { Demand } & 10000 \text { units } & 12500 \text { units } \\\text { Selling price } & \$ 51 & \$ 48.50 \\\text { Variable costs per unit } & \$ 45 & \$ 44\end{array}$
-Would you recommend the $2 price decrease?

• A)Yes,because demand increases.
• B)No,because contribution margin per unit decreases.
• C)No,because operating profit decreases.
• D)No,because the selling price decreases.

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