Answer the Following Questions Using the Information Below:
Bright Lights

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.

Correct Answer:

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