Reference no: EM133152113

Question - Elle Fanning's Corporate manufactures a component used by car manufacturers. Elle Fanning can produce 1,000,000 components per year. A foreign car manufacturer has approached Elle Fanning with an offer to purchase 120,000 components at price of $6 per unit. Elle Fanning 's results for last year are as follows:

Sales (900,000 at $8) $7,200,000

Variable costs 2,700,000

Contribution margin 4,500,000

Fixed costs 2,350,000

Operating income $2,150,000

If Elle Fanning accepts the offer, it will only be able to sell 880,000 units at the regular price due to its capacity constraints. What will Elle Fanning's total operating income be next year if it accepts the offer?

a. $2,710,000

b. $2,410,000

c. $2,650,000

d. $4,760,000