Fixed Costs Adjustment for Target Profit

Steps:

• Calculate original fixed costs: Total contribution = 10,000 units × $10 =$100,000; Profit = $60,000, so fixed costs =$100,000 - $60,000 =$40,000.
• Identify the plan's impact: Advertising increases by $10,000, treated as additional fixed cost.
• Add to original fixed costs: New total fixed costs = $40,000 +$10,000 = $50,000.
• Note: Variable costs and selling price unchanged; question asks only for total fixed costs under plan.

Why D is correct:

• Fixed costs include all non-variable expenses; advertising increase directly adds to fixed costs per cost-volume-profit analysis.

Why the others are wrong:

• A: Ignores original fixed costs, understates by $30,000.
• B: Understates by $20,000, possibly confusing with profit shortfall.
• C: Matches original fixed costs, omits advertising increase.

Final answer: D