Answer the following questions using the information below:
Contrafic Lighting manufactures small flashlights 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.
$$\begin{array} { l r r }
& \text { Current } & \text { Projected } \
\text { Demand } & 75,000 \text { units } & 68,000 \text { units } \
\text { Selling price } & \$ 8.50 & \$ 9.25 \
\text { Incremental cost per unit } & \$ 4.80 & \$ 4.80
\end{array}$$
-If the price increase is implemented,operating profit is projected to ________.
A) increase by $25,100
B) decrease by $5,250
C) increase by $5,250
D) decrease by $7,000

Question

Answer the following questions using the information below:
Contrafic Lighting manufactures small flashlights 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.
 $$\begin{array} { l r r } 
& \text { Current } & \text { Projected } \
\text { Demand } & 75,000 \text { units } & 68,000 \text { units } \
\text { Selling price } & \$ 8.50 & \$ 9.25 \
\text { Incremental cost per unit } & \$ 4.80 & \$ 4.80
\end{array}$$
-If the price increase is implemented,operating profit is projected to ________.
A) increase by $25,100
B) decrease by $5,250
C) increase by $5,250
D) decrease by $7,000

Quizplus · Accepted Answer

Explanation:The price increase will result in a decrease in demand of 7,000 units. The new selling price will be $9.25 per unit, and the incremental cost per unit will remain at $4.80. The operating profit is calculated as follows:Operating profit = (Selling price - Incremental cost per unit) * DemandOperating profit = ($9.25 - $4.80) * 68,000 unitsOperating profit = $4.45 * 68,000 unitsOperating profit = $303,400The current operating profit is calculated as follows:Operating profit = (Selling price - Incremental cost per unit) * DemandOperating profit = ($8.50 - $4.80) * 75,000 unitsOperating profit = $3.70 * 75,000 unitsOperating profit = $277,500The increase in operating profit is $303,400 - $277,500 = $25,900.

Answer the Following Questions Using the Information Below: Contrafic Lighting

Answer the Following Questions Using the Information Below:
Contrafic Lighting