Question
Blossom Company manufactures dog food for distribution in Washington, Oregon, and California. A dog food distributor from Florida has approached Blossom and offered to purchase
Blossom Company manufactures dog food for distribution in Washington, Oregon, and California. A dog food distributor from Florida has approached Blossom and offered to purchase 241000 pounds of dog food for $1.40 per pound. Blossom can produce 2002000 pounds of dog food per year, and its results for last year are as follows:
Sales (1821000 at $1.65) | $3004650 |
Variable costs | 1092600 |
Contribution margin | 1912050 |
Fixed costs | 791000 |
Operating income | $1121050 |
If Blossom accepts the offer, it will only be able to sell 1761000 pounds of dog food at the regular price due to its capacity constraints. What will Blossom's total operating income be next year if it accepts the offer?
$1359450
$1250850
$2041850
$1311100
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