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What will crane total operating income be next year

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Question - 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?

Reference no: EM133186746

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