Thomas Industrial Products Is Considering Offering a Special One-Time Deal

question 150

Multiple Choice

Thomas Industrial Products is considering offering a special one-time deal to its best customers. The company expects this offering to increase its total sales from 1,400 units to 1,550 units. The variable cost per unit is $134.31. The total fixed cost is $125,000. If the company is willing to accept the lowest possible price without losing money, it should charge a price equal to:

• A) $134.31 + ($125,000/1,550).
• B) $134.31 + ($125,000/1,400).
• C) $125,000/1,400.
• D) $125,000/1,550.
• E) $134.31.

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Definitions:

Obligation

A legal or financial duty or commitment one party owes to another, often in the form of debts or contractual agreements.

Flexibility Options

Options within contracts or agreements that allow for adjustments based on varying circumstances or needs.

Business Conditions

The state of the economic and market environment that affects the operation, performance, and strategy of companies.

Real Options

Financial analysis techniques that value the flexibility of making future investment choices under uncertain conditions.