1. The Miller Company produces wiring tools. The company is presently producing well below its full capacity. The Brisbois Company has approached Miller with an offer to buy 5,000 tools at $17.50 each. Miller 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 Miller were to admit Brisbois's offer, what would be increase in Miller's operating profits?
b. Suppose that Miller is operating at full capacity. If Miller were to accept Brisbois's offer, find what would be the change in Miller's operating profits?