Answer the Following Questions Using the Information Below

Multiple Choice

Answer the following questions using the information below:
Ernie Shavers, Inc. manufactures electric shavers and is considering decreasing the price by $3 a unit for the coming year. With a $3 price decrease, the unit demand is expected to increase by 25%, and a high volume materials discount is expected to decrease the variable costs per unit by $1 per unit.

-Would you recommend the $3 price decrease?

A) Yes, because demand increases.
B) No, because the selling price decreases.
C) No, because operating income decreases.
D) Yes, because contribution margin per unit increases.