Question
Carla Vista Industries manufactures a component used by car manufacturers. Carla Vista can produce 1040000 components per year. A foreign car manufacturer has approached Carla
Carla Vista Industries manufactures a component used by car manufacturers. Carla Vista can produce 1040000 components per year. A foreign car manufacturer has approached Carla Vista with an offer to purchase 140000 components at price of $6 per unit. Carla Vistas results for last year are as follows:
Sales (920000 at $8) | $7360000 |
Variable costs | 2760000 |
Contribution margin | 4600000 |
Fixed costs | 2370000 |
Operating income | $2230000 |
If Carla Vista accepts the offer, it will only be able to sell 900000 units at the regular price due to its capacity constraints. What will Carla Vistas total operating income be next year if it accepts the offer?
$2830000
$4920000
$2550000
$2910000
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