Troy City​ Inc., manufactures a product and is considering raising the price by​ $20 a unit for the coming year. With a​ $20 price​ increase, demand is expected to fall by​ 2,500 units.     Currently Projected   Demand ​21,000 units ​18,500 units   Selling Price ​$170 ​$190   Variable costs per unit ​$110 ​$110     Would you recommend the​ $20 price​ increase?   A. ​Yes, because operating income increases.   B. ​Yes, because inventory turnover increases.   C. ​No, because demand decreased.   D. ​No, because the contribution margin decreases.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Troy City​ Inc., manufactures a product and is considering raising the price by​ $20 a unit for the coming year. With a​ $20 price​ increase, demand is expected to fall by​ 2,500 units.
 
 
Currently
Projected
 
Demand
​21,000 units
​18,500 units
 
Selling Price
​$170
​$190
 
Variable costs per unit
​$110
​$110
 
 
Would you recommend the​ $20 price​ increase?
 
A.
​Yes, because operating income increases.
 
B.
​Yes, because inventory turnover increases.
 
C.
​No, because demand decreased.
 
D.
​No, because the contribution margin decreases.
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