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What will ivanhoe total operating income be next year

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Reference no: EM133041826

Question - Ivanhoe Industries manufactures a component used by car manufacturers. Ivanhoe can produce 1030000 components per year. A foreign car manufacturer has approached Ivanhoe with an offer to purchase 135000 components at price of $6 per unit. Ivanhoe's results for last year are as follows:

Sales (915000 at $8) $7320000

Variable costs 2745000

Contribution margin 4575000

Fixed costs 2365000

Operating income $2210000

If Ivanhoe accepts the offer, it will only be able to sell 895000 units at the regular price due to its capacity constraints. What will Ivanhoe's total operating income be next year if it accepts the offer?

a. $2860000

b. $4880000

c. $2785000

d. $2515000

Reference no: EM133041826

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