Would you recommend the 50-cent price increase?

ACCOUNTING

Multiple Choice

LeBlanc Lighting 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 3,000 units.

Currently Projected

Demand 20,000 units 17,000 units

Selling price $4.50 $5.00

Incremental cost per unit $3.00 $3.00



Would you recommend the 50-cent price increase?

a. No, because demand decreased.

b. No, because the selling price increases.

c Yes, because contribution margin per unit increases.

d. Yes, because operating profits increase.


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