Harrison Products’ capacity is 20,000 units a year. A summary of operating results for last year is:

A foreign distributor has offered to buy a guaranteed 8,000 units at £95 per unit next year. Harrison expects its regular sales next year to be 15,000 units.

If Harrison accepts this offer and forgoes some of its expected sales to ensure that it does not exceed capacity, what would be the total operating profit next year assuming that total fixed costs increase by £100,000?

Transcribed Image Text:

Sales (12,000 units @ 100) 1,200,000 Variable costs 588,000 Contribution margin 612,000 Fixed costs 245,000 Net operating income 367.000