Oriole Inc. makes the coolest on-trend decks of cards while treating its employees well, providing good benefits, and giving back to local schools. It's a respectable organization all around. You've recently heard that it is considering a change in approach-instead of manufacturing the cardstock, it's considering purchasing the cardstock from a supplier and focusing on the print/design aspect of the playing cards. Oriole would repurpose existing space to expand the design/printing process, so it would not lay off any employees. thereby maintaining its community commitment. One manager in the company doesn't think this is a sound plan. He was overheard saying: "This whole plan is a joke; if they buy the cardstock, it will be more expensive than what it costs us to make. They're telling us that we'll be able to absorb that higher cost, since we can expand our printing business without any additional fixed costs. Still, my bonus is tied to contribution margin ratio, so that higher purchase cost means a lower bonus for me. No thank you!" The management team was shown the following information. Projected Income Statement (if making the cardstock) Sales Variable costs Contribution margin Fixed costs Operating income $4,662,000 1,888,000 2,774,000 1,397,000 $1,377,000 Projected Income Statement (if buying the cardstock) Sales $5,138,000 Variable costs 2,252,000 Contribution margin 2,886,000 Fixed costs 1,397,000 Operating income $1,489,000