Michelle$$s Kreations just completed its best year, generating income of $$62,000$ from selling decadent wedding cakes and desserts. For a business that is only two years old and run from Michelle$$s own kitchen, this is quite an accomplishment. She has been asked to provide a special$-$event cake for one event per month at the local convention center, but at a reduced price of $$420.$

While this is mostly fantastic news, Michelle realizes that she is already working at maximum capacity. If she commits to these events, she will need to either find additional capacity or reduce her regular wedding cake sales. The following income statement shows Michelle$$s results from last year.

Sales $$230,000$

COGS $$128,000$

Gross Margin $$102,000$

Operating Expenses $ $40,000$

Operating Income $ $62,000$

Michelle$$s average selling price is $$1,000$ per cake; fixed$-$MOH costs are $$68,200$ and are included in COGS. All other product costs vary based on volume. Average variable operating expenses are $$94$ per cake; remaining operating expenses are fixed. After thinking about it further, she realizes she$$ll avoid the variable operating expenses on the special$-$event cakes.

$($b$)$ To maintain her current sales while also capitalizing on the new event opportunity, Michelle could rent alternative kitchen space for these monthly special orders. Fixed operating costs would increase by $$6,000$ to cover space and equipment leases, as well as an overtime stipend for her shift supervisor. She anticipates the same per$-$unit variable product cost as last year. How much operating income will her business generate next year under this scenario?

Total operating income $

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