Flash City Inc

question 30

Multiple Choice

Flash City Inc.manufactures small flash drives and is considering raising the price by 75 cents a unit for the coming year.With a 75-cent price increase,demand is expected to fall by 7,000 units.

If the price increase is implemented,operating profit is projected to ________.

• A)increase by $35,100
• B)decrease by $5,250
• C)increase by $5,250
• D)decrease by $7,000

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Definitions:

Equipment Exchanges

Transactions where businesses trade equipment with each other, often to update or upgrade their operational assets without significant cash outflows.

Commercial Substance

Transactions that cause a significant change in the future cash flows of a company.

Carrying Amount

The book value of assets and liabilities as recorded in an entity's financial statements, minus any accumulated depreciation or amortization.

Straight-Line Method

An approach to depreciation that involves evenly allocating an asset's cost over the period of its useful life.