Question
Blossom Industries manufactures a component used by car manufacturers. Blossom can produce 1024000 components per year. A foreign car manufacturer has approached Blossom with an
Blossom Industries manufactures a component used by car manufacturers. Blossom can produce 1024000 components per year. A foreign car manufacturer has approached Blossom with an offer to purchase 132000 components at price of $6 per unit. Blossoms results for last year are as follows:
Sales (912000 at $8) | $7296000 |
Variable costs | 2736000 |
Contribution margin | 4560000 |
Fixed costs | 2362000 |
Operating income | $2198000 |
If Blossom accepts the offer, it will only be able to sell 892000 units at the regular price due to its capacity constraints. What will Blossoms total operating income be next year if it accepts the offer?
a. $4856000
b. $2830000
c. $2758000
d. $2494000
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