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

Question

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

Quizplus · Accepted Answer

Change in operating income = [72,000 × ($9.25 - $5.80)] - [79,000 × ($8.50 - $5.80)] = Increase of $35,100