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Question
Thompson Company had the following results of operations for the past year:
| Sales (16,000 units at $10).............................................. | $160,000 | |
| Direct materials and direct labor.............................................. | $96,000 | |
| Overhead (20% variable).............................................. | 16,000 | |
| Selling and administrative expenses (all fixed) | 32,000 | (144,000) |
| Operating income.............................................. | $ 16,000 |
A foreign company (whose sales will not affect Thompson's market) offers to buy 4,000 units at $7.50 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $600 and selling and administrative costs by $300. If Thompson accepts the offer, its profits will:
A. Increase by $30,000.
B. Increase by $ 6,000.
C. Decrease by $ 6,000.
D. Increase by $ 5,200.
E. Increase by $ 4,300.
Answer
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Related questions
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