Please show how to solve this step by step. 3. LO 2 The manufacturing capacity o

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Please show how to solve this step by step.

3. LO 2 The manufacturing capacity of Jordan Company's facilities is 30,000 units per year. Last year's operating results are as follows: Sales (18,000 units S100) S1,800,000 Variable costs Contribution margin Fixed costs Net operating income315,.000 990,000 810,000 495,000 A foreign distributor has offered to buy 15,000 units next year at a price of $90 per unit. If Jordan accepts the offer it can sell only 15,000 units at the regular price in order not to exceed capacity. What will be the company's total net operating income next year? (a) S1,335,000 (b) S 840,000 (c) $ 855,000 (d) S 705,000 ANSWER (d) S 705,000

Explanation / Answer

(d) $705,000

Revenues, (15,000 x $100) + (15,000 x $90) $2,850,000 Variable costs, ($990,000 / 18,000) x 30,000 $1,650,000 Contribution margin $1,200,000 Fixed costs $495,000 Operating income $705,000

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