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Knoll Manufacturing has manufacturing facilities in several locations. One of Knoll's facilities ...

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Knoll Manufacturing has manufacturing facilities in several locations. One of Knoll's facilities ...

Knoll Manufacturing has manufacturing facilities in several locations. One of Knoll'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 Knoll. The annual wage of each part-time worker is $14,400. 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	$3,650,000
Less: Variable expenses	2,555,000
Contribution margin	1,095,000
Less: Fixed expenses
Wages	684,000
Insurance	176,800
Depreciation	294,000
Advertising	22,000
Operating income	$ (81,800)

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

▸ Increase by $81,800 per year

▸ Decrease by $241,000 per year

▸ Increase by $322,800 per year

▸ Decrease by $226,600 per year

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Managerial Accounting

Edition: 4^th

Author: Davis

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