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Talja [164]
3 years ago
10

Edison's Lights makes light bulbs. The company is currently producing well below its full capacity. Lamp Land has approached Edi

son's Lights with an offer to buy 20,000 light bulbs at $0.75 each. Edison;s Lights sells its light bulbs wholesale for $0.85 each; the average cost per unit is $0.83, of which $0.12 is fixed costs. If Edison's Lights were to accept Lamp Land's offer, what would be the increase in Edison's Lights' operating profits?
Business
1 answer:
Korvikt [17]3 years ago
5 0

Answer:

the increase in Edison's Lights' operating profits would be  $400

Explanation:

<u>Analysis of the effects of Accepting Lamp Land's offer</u>

Sales (20,000 x $0.75)                                   $15,000

Less Incremental Costs :

Variable Cost (20,000 x $0.73)                     ($14,600)

Operating Profit                                                    $400

thus

If Edison's Lights were to accept Lamp Land's offer, the increase in Edison's Lights' operating profits would be  $400

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