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What would be the increase in AZs operating profits

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Reference no: EM131776619

Question - 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: EM131776619

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