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Crane Industries manufactures a component used by car manufacturers. Crane can produce 1048000 components per year. A foreign car manufacturer has approached Crane with an
Crane Industries manufactures a component used by car manufacturers. Crane can produce 1048000 components per year. A foreign car manufacturer has approached Crane with an offer to purchase 144000 components at price of $6 per unit. Crane's results for last year are as follows:
Sales (924000 at $8) | $7392000 |
Variable costs | 2772000 |
Contribution margin | 4620000 |
Fixed costs | 2374000 |
Operating income | $2246000 |
If Crane accepts the offer, it will only be able to sell 904000 units at the regular price due to its capacity constraints. What will Crane's total operating income be next year if it accepts the offer?
$4952000
$2866000
$2578000
$2950000
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