The Morris Company Manufactures Wiring Tools

question 59

Essay

The Morris Company manufactures wiring tools.The company is currently producing well below its full capacity.The Baker Company has approached Morris with an offer to buy 5,000 tools at $17.50 each.Morris sells its tools wholesale for $18.50 each;the average cost per unit is $18.30,of which $2.70 is fixed costs.Required:
a.If Morris were to accept Baker's offer,what would be the increase in Miller's operating profits?
b.Assume that Morris is operating at full capacity.If Morris were to accept Baker's offer,what would be the change in Morris' operating profits?

---

Definitions:

Pharyngitis

Inflammation of the pharynx, causing sore throat and difficulty swallowing; it can be caused by viruses or bacteria.

Thoracotomy

A surgical procedure involving an incision into the chest wall to access organs in the thoracic cavity.

Anthracosis

A lung condition caused by the inhalation of coal dust, leading to blackening of the lungs, also known as "black lung disease."

Bronchiectasis

A chronic condition where the walls of the bronchi are thickened from inflammation and infection causing permanent enlargement of parts of the airways of the lung.