Thompson Company had the following results of operations for the past year: Sale

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.

Explanation / Answer

30,000 sales (4,000*7.50) -24,000 DM and DL(96,000/16,000 * 4000) -800 variable OH (0.2*16,000/16,000 * 4000) -600 increaed in fixed overhead -300 increase in selling and admin = 4,3000 Answr: Increase by $4,300

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.