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What would be the impact on Sunland overall operating income

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Reference no: EM133066927

Question - Sunland Manufacturing has manufacturing facilities in several locations. One of Sunland's facilities has been showing losses over several quarters, and management is considering closing the facility. If the facility is closed, only two part-time employees will be retained by Sunland. The annual wage of each part-time worker is $15200. This particular location has been in operation for many years. As a result, the manufacturing equipment has no resale value. Following is the most recent income statement for the facility:

Sales $3658000

Less: Variable expenses 2560000

Contribution margin 1098000

Less: Fixed expenses Wages 684800

Insurance 177600

Depreciation 294800

Advertising 22800

Operating income $(82000)

Required - What would be the impact on Sunland's overall operating income if the manufacturing facility is eliminated?

a. Increase by $325200 per year.

b. Decrease by $243200 per year.

c. Decrease by $228000 per year.

d. Increase by $82000 per year.

Reference no: EM133066927

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