Answer the Following Questions Using the Information Below:
Bright Lights

question 32

Multiple Choice

Answer the following questions using the information below:
Bright Lights Company manufactures small flashlights and is considering raising the price by 50 cents a unit for the coming year.With a 50-cent price increase,demand is expected to fall by 3000 units.
$$\begin{array} { l r r } & \text { Currently } & \text { Projected } \\\text { Demand } & 20000 \text { units } & 18000 \text { units } \\\text { Selling price } & \$ 4.50 & \$ 5.00 \\\text { Incremental cost per unit } & \$ 3.00 & \$ 3.00\end{array}$$
-Would you recommend the 50-cent price increase?

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

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Definitions:

Prepaid Rent Expense

An expense account that records payments for rent made in advance of the rental period.

Adjusting Entry

At the end of an accounting timeframe, records are made to attribute income and spending to the specific period in which they were incurred.

Accumulated Depreciation

The total sum of depreciation for a fixed asset that has been charged to expense since the asset was acquired and placed into service.

Book Value

The value of an asset as recorded on the balance sheet, calculated as the cost of the asset minus any accumulated depreciation.