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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 1004000 components per year. A foreign car manufacturer has approached Crane with an offer to purchase 122000 components at price of $6 per unit. Crane's results for last year are as follows:

Sales (902000 at $8) $7216000

Variable costs 2706000

Contribution margin 4510000

Fixed costs 2352000

Operating income $2158000

If Crane accepts the offer, it will only be able to sell 882000 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: EM133189363

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