Answer the Following Questions Using the Information Below:
Velim Electronics

question 170

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.
$\begin{array}{lrr}&\text { Currently }&\text { Projected }\\\text { Demand } & 10,000 \text { units } & 12,500 \text { units } \\\text { Selling price } & \$ 51 & \$ 49 \\\text { Variable costs per unit } & \$ 45 & \$ 44\end{array}$
-Einstein Motors,has a capacity to produce 25,000 electric cars.Due to a temporary subsidy announced,there is a sudden increase in demand.Einstein decides to adopt peak-load pricing and charge a premium of 25% over its normal selling price of $2,000.It has already accepted orders for 20,000 units at normal selling price.What is the total contribution to the company on sale of additional 5,000 units if the variable cost per unit is $900?

• A) $10,000,000
• B) $8,000,000
• C) $4,500,000
• D) $4,000,000

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Definitions:

Subscriptions Receivable

An amount owed by customers for subscription services or products that have been provided but not yet paid for.

Paid-in Capital

Paid-in capital is the amount of money that a company has received from shareholders in exchange for shares of stock, reflecting the capital that has been invested in the company beyond its par value.

Common Stock Subscribed

A commitment by investors to purchase shares of a company's common stock, where the shares are reserved for the subscribers until payment is made.

Dividends in Arrears

Dividends on preferred shares that have not been paid in the scheduled time, accruing until they are paid out.