Thompson Company Had the Following Results of Operations for the Past

question 91

Multiple Choice

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.

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Definitions:

Purchasing Cooperative

An organization owned and operated by a group of individuals for their mutual benefit, specifically to increase their bargaining power and obtain goods or services at better prices.

Angel Investors

Wealthy individuals who provide capital for a business start-up, usually in exchange for convertible debt or ownership equity.

Succession Problem

The succession problem is the issue of who will run the business when the current head leaves.

Family Businesses

Family businesses are owned and controlled by family members.