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

Question

Quizplus · Accepted Answer

The profit increase is calculated by taking the additional revenue from selling 4,000 units at $7.50 each, subtracting the additional fixed overhead and selling/administrative costs.

Thompson Company Had the Following Results of Operations for the Past