Answer the Following Questions Using the Information Below:
Velim Electronics

Multiple Choice

Answer the following questions using the information below:
Velim Electronics manufactures electric shavers and is considering decreasing the price by $2 a unit for the coming year. With a $2 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.
$\begin{array}{lrr}&\text { Currently }&\text { Projected }\\\text { Demand } & 10,000 \text { units } & 12,500 \text { units } \\\text { Selling price } & \$ 51 & \$ 49 \\\text { Variable costs per unit } & \$ 45 & \$ 44\end{array}$
-Would you recommend the $2 price decrease?

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