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.

---

Definitions:

Industrial Service

Services provided to businesses rather than individual consumers, which may include maintenance, repair, and professional advisory.

Photocopier Maintenance

The routine checking and servicing of photocopying machines to ensure their proper functioning and longevity.

Business Products

Goods and services that are purchased for the purpose of being used in the production of other goods and services, to support daily operations or for resale.

Oral Contraceptives

Medications taken by mouth to prevent pregnancy, commonly referred to as birth control pills, which contain hormones to inhibit ovulation.