Thomas Company Has Total Fixed Costs of $360,000 and Variable

question 24

Essay

Thomas Company has total fixed costs of $360,000 and variable costs of $14 per unit. If the unit sales price is reduced from $24 to $20 and advertising is increased by $10,000, sales will increase from 40,000 to 65,000 units. Should Thomas reduce its per unit sales price and pay for the additional advertising? (Support your answer with calculations.)

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Definitions:

Negative Affectivity

A personality characteristic involving the predisposition to experience negative emotions such as anger, anxiety, or depression more frequently or intensely than average.

Carpal Tunnel Syndrome

Repetitive-motion disorder most frequently associated with keyboarding and the use of optical scanners; occurs when repetitive flexing and extension of the wrist causes the tendons to swell, thus trapping and pinching the median nerve.

Median Nerve

A major nerve in the human body that runs down the arm and forearm, and into the hand, playing a significant role in the control of hand and finger movements.

Wrist Tendons

Fibrous connective tissues that connect muscles to bones in the wrist, facilitating movement and support.