THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 46 AND 47.
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.
Incremental cost per unit
If the price increase is implemented, operating profit is projected to
increase by $4,000.
decrease by $4,000.
increase by $6,000.
decrease by $4,500.
Answer: a Difficulty: 2
[17,000 x ($5 - $3)] [20,000 x ($4.50 - $3.00)] = increase of
47. 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.
Answer: d Difficulty: 2 Objective: 1
For decision making, a listing of the relevant costs
a. will help the decision maker concentrate on the pertinent data.
b. will only include future costs.
c. will only include costs that differ among alternatives.
d. should include all of the above.