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Aquinas College Operations And Supply Chain Management Assignment Help - Thompson Company


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:
Increase by $30,000.
Increase by $ 6,000.
Decrease by $ 6,000.
Increase by $ 5,200.
Increase by $ 4,300.

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