Velim Electronics Manufactures Electric Shavers and Is Considering Decreasing the Price

Multiple Choice

Velim Electronics 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 $2 per unit.
$\begin{array}{lll} & \text { Currently } & \text { Projected } \\\text { Demand } & 50,000 \text { units } & 62,500 \text { units } \\\text { Selling price } & \$ 60 & \$ 57 \\\text { Variable costs per unit } & \$ 52 & \$ 50\end{array}$
Would you recommend the $3 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.