Answer the Following Questions Using the Information Below:
Velim Electronics

question 20

Multiple Choice

Answer the following questions using the information below:
Velim Electronics manufactures electric shavers and is considering decreasing the price by $2 a unit for the coming year. With a $2 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.
$\begin{array}{lrr}&\text { Currently }&\text { Projected }\\\text { Demand } & 10,000 \text { units } & 12,500 \text { units } \\\text { Selling price } & \$ 51 & \$ 49 \\\text { Variable costs per unit } & \$ 45 & \$ 44\end{array}$
-Would you recommend the $2 price decrease?

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

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Definitions:

Low-Risk Individuals

People who are considered to have a lower probability of experiencing adverse events or making claims, often used in the context of insurance underwriting and premium setting.

Co-payments

Fixed amounts paid by an insured person for receiving specific health care services, with the insurance covering the remainder of the costs.

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A residential area with enhanced security measures and protocols to protect its inhabitants.

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An area characterized by higher risk of crimes or adverse events, affecting residents' sense of safety.