Question
Gravenberch Corporation has the following information related to the sales of its one product. Sales Price: $98 per unit Variable Costs: $60 per unit Fixed
Gravenberch Corporation has the following information related to the sales of its one product. Sales Price: $98 per unit Variable Costs: $60 per unit Fixed Costs: $2,390,000 In the next year, the company is expected to produce more products than its current operation capacity. Gravenberch Corporation plants can currently support the production of 72,000 units. Gravenberch Corporation wants to produce 100,000 units next year. There are two options. Option 1: Employ a subcontractor for the additional units above its production capacity. The subcontractor charges $78 per unit. Option 2: Expand the current operations. This would increase the fixed costs by $410,000. (a) What is the Contribution Margin and Operating Income in total dollars for both options? (b) What option do you prefer and why. (C) if instead gravenberch company expects to produce 90,000 units, which option would you prefer and why?
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