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Amit sells handmade specialty paper. Suddenly, there is a drop in demand. Amit can counter this sudden drop in demand by cutting down the selling
Amit sells handmade specialty paper. Suddenly, there is a drop in demand. Amit can counter this sudden drop in demand by cutting down the selling price by 10% (call this option 1) or holding the price the same but offer a better quality product by increasing the variable cost by 10% (call this option 2). Amit thinks that this is the right move since he feels that he has a hefty positive unit contribution margin as of now. Which of the following statements is true? O a. Option 1 results in smaller decrease in unit contribution margin compared to option 2 b. Option 2 results in 10% decrease in unit contribution margin c. Option 1 results in 10% decrease in unit contribution margin d. Option 2 results in smaller decrease in unit contribution margin compared to option 1 e. Both options result in identical amount of decrease in unit contribution margin
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