Ivanhoe Industries manufactures a component used by car manufacturers. Ivanhoe can produce 1008000 components per...
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Accounting
Ivanhoe Industries manufactures a component used by car manufacturers. Ivanhoe can produce 1008000 components per year. A foreign car manufacturer has approached Ivanhoe with an offer to purchase 124000 components at price of $6 per unit. Ivanhoes results for last year are as follows:
Sales (904000 at $8)
$7232000
Variable costs
2712000
Contribution margin
4520000
Fixed costs
2354000
Operating income
$2166000
If Ivanhoe accepts the offer, it will only be able to sell 884000 units at the regular price due to its capacity constraints. What will Ivanhoes total operating income be next year if it accepts the offer?
$2438000
$2686000
$2750000
$4792000
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