Reference no: EM132811052

Lebo 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.

                                Currently           Projected
Demand                  20 000 units          17 000 units
Selling price                    R4.50                R5.00
Incremental cost per unit      R3.00            R3.00

Problem 1: If the price increase is implemented, operating profit is projected to:

a. Increase by R4 000
b. Decrease by R4 000
c. Increase by R6 000
d. Decrease by R4 500

Problem 2: A computer system installed last year is an example of a(n):

a. Sunk cost
b. Relevant cost
c. Differential cost
d. Avoidable cost

Problem 3:  In evaluating different alternatives, it is useful to concentrate on:

a. variable costs
b. fixed costs
c. total costs
d. relevant costs

Problem 4:  Relevant information has all of these characteristics EXCEPT:

a. past costs are irrelevant
b. all future revenues and expenses are relevant
c. different alternatives can be compared by examining differences in total revenue and expenses
d. qualitative factors should be considered