The Arthur Company manufactures kitchen utensils. The company is currently producing well below its full capacity. The Benton Company has approached Arthur with an offer to buy 15,000 utensils at $0.90 each. Arthur sells its utensils wholesale for $1.00 each; the average cost per unit is $0.96, of which $0.14 is fixed costs. If Arthur were to accept Benton's offer, what would be the increase in Arthur's operating profits

$1,200

Explanation:

Since  Arthur Company is producing below its capacity, it means it does not have to increase in plant capacity, I mean fixed costs in order to fulfil the special order, hence, in determining the increase in operating profits, we would only consider variable costs.

average cost per unit=variable cost per unit+fixed cost per unit

$0.96=variable cost per unit+$0.14

variable cost per unit=$0.96-$0.14

variable cost per unit=$0.82

Increase in operating profits=(special order price-variable cost per unit)*quantity of special order

special order price=$0.90

variable cost per unit=$0.82

quantity of special order=15000 utensils

Increase in operating profits=($0.90-$0.82)*15000

Increase in operating profits=$1,200

hi there, i would say your answer is:

b. there is a fixed quantity of resources and technology available.

hope that : )

answer/// there is an inverse relationship between price and quantity demanded;