Reference: 18_05 Thomas Company Has Total Fixed Costs of $360,000 and Variable

question 162

Multiple Choice

Reference: 18_05
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.
-What are the contribution margin and net income under the current conditions?

• A) $650,000 and $280,000 respectively.
• B) $400,000 and $40,000 respectively.
• C) $280,000 and $40,000 respectively.
• D) $390,000 and $20,000 respectively.
• E) $400,000 and $20,000 respectively.

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Definitions:

Marginal Cost

The increase in expenses associated with the production of an extra good or service unit.

Price Discrimination

A pricing strategy where a firm sells the same product at different prices to different groups of consumers, based on their willingness to pay, without any differences in production cost.

College ID Cards

Identification cards issued by colleges or universities to students, faculty, and staff to access campus facilities and services.

Ice Cream Store

A retail shop specializing in selling ice cream and related desserts.