ABC Toys manufactures and sells wooden toys for $15 each. The company has the capacity to produce 25,000 toys in a year, but is currently producing and selling 20,000 toys per year. The company currently is incurring the following costs at its current production level of 20,000 toys:
A retailer is interested in purchasing the excess capacity of 5,000 toys if it can receive a special price. This special order would not affect ABC Toys' regular sales or its cost structure. ABC Toys' profits would increase from this special order if the special order price per toy is greater than
A) $8.00.
B) $5.80.
C) $7.25.
D) $14.25.
Correct Answer:
Verified
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