Rise in the operating profits

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Reference no: EM13157096

The AZ Company manufactures kitchen utensils. The company is currently producing well below its full capacity. The BV Company has approached AZ with an offer to buy 20,000 utensils at $0.75 each. AZ sells its utensils wholesale for $0.85 each; the average cost per unit is $0.83, of which $0.12 is fixed costs. If AZ were to accept BV's offer, what would be the increase in AZ's operating profits?

a. $400

b. $800

c. $1,600

d. $2,000

e. AZ's operating profits will not increase as a result of accepting the special order.

Reference no: EM13157096

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