Kimberly's Kreations just completed its best year, generating income of $$26,000$ from selling decadent wedding cakes and desserts.

For a business that is only two years old and run from Kimberly's own kitchen, this is quite an accomplishment. She has been asked to

provide a special$-$event cake for one event per month at the local convention center, but at a reduced price of $$450.$

While this is mostly fantastic news, Kimberly realizes that she is already working at maximum capacity. If she commits to these events,

she will need to either find additional capacity or reduce her regular wedding cake sales. The following income statement shows

Kimberly's results from last year.

Kimberly's average selling price is $$1,000$ per cake; fixed$-$MOH costs are $$67,400$ and are included in COGS. All other product costs

vary based on volume. Average variable operating expenses are $$100$ per cake; remaining operating expenses are fixed. After thinking

about it further, she realizes she'll avoid the variable operating expenses on the special$-$event cakes.

$($a$)$

Correct Answer $($Used$)$

To keep her existing sales volume and take on the new convention center events, Kimberly would need to hire additional

employees who would "invade" her home while she and her family sleep. Hiring dependable night$-$shift workers would increase

her variable product costs per unit by $20\%.$ If she maintains her existing sales and takes on the new events under these

circumstances, how much total operating income will she show for next year?

Total operating income $

$($b$)$

To maintain her current sales while also capitalizing on the new event opportunity, Kimberly could rent alternative kitchen space

for these monthly special orders. Fixed operating costs would increase by $$3,000$ to cover space and equipment leases, as well as

an overtime stipend for her shift supervisor. She anticipates the same per$-$unit variable product costs as last year. How much

operating income will her business generate next year under this scenario?

Total operating income $

Please help solve part B