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The Reliable Company makes industrial parts. The company is producing significantly below its capacity at present. The Erstwhile Company has made an offer to buy
The Reliable Company makes industrial parts. The company is producing significantly below its capacity at present. The Erstwhile Company has made an offer to buy 40,000 parts from Reliable at $1.25 each. Reliable sells its parts wholesale for $1.40 each. The average cost per unit is $1.28, of which $0.15 is fixed cost. If Reliable were to accept Erstwhile's offer, what would be the increase in Reliables operating profit?
A. $2,400 B. $4,800 C. $3,600 D. $1,200
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