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Ivanhoe Industries manufactures a component used by car manufacturers. Ivanhoe can produce 1008000 components per year. A foreign car manufacturer has approached Ivanhoe with an

Ivanhoe Industries manufactures a component used by car manufacturers. Ivanhoe can produce 1008000 components per year. A foreign car manufacturer has approached Ivanhoe with an offer to purchase 124000 components at price of $6 per unit. Ivanhoes results for last year are as follows:

Sales (904000 at $8)

$7232000

Variable costs

2712000

Contribution margin

4520000

Fixed costs

2354000

Operating income

$2166000

If Ivanhoe accepts the offer, it will only be able to sell 884000 units at the regular price due to its capacity constraints. What will Ivanhoes total operating income be next year if it accepts the offer?

$2438000

$2686000

$2750000

$4792000

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