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:
$\begin{array}{lr}
\text { Sales } & \$ 3,650,000 \
\text { Less: Variable expenses } & \underline{2,555,000} \
\text { Contribution margin } & 1,095,000 \
\text { Less: Fixed expenses } & \
\text { ~~Wages } & 684,000 \
\text { ~~Insurance } & 176,800 \
\text { ~~Depreciation } & 294,000 \
\text { ~~Advertising } & \underline{22,000} \
\text { Operating income } & \$ 81,800
\end{array}$ What would be the impact on Knoll's overall operating income if the manufacturing facility is eliminated?

Question

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:
 $\begin{array}{lr}
\text { Sales } & \$ 3,650,000 \
\text { Less: Variable expenses } & \underline{2,555,000} \
\text { Contribution margin } & 1,095,000 \
\text { Less: Fixed expenses } & \
\text { ~~Wages } & 684,000 \
\text { ~~Insurance } & 176,800 \
\text { ~~Depreciation } & 294,000 \
\text { ~~Advertising } & \underline{22,000} \
\text { Operating income } & \$ 81,800
\end{array}$ What would be the impact on Knoll's overall operating income if the manufacturing facility is eliminated?

Quizplus · Accepted Answer

The Answer of 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:
 $\begin{array}{lr}
\text { Sales } & \$ 3,650,000 \
\text { Less: Variable expenses } & \underline{2,555,000} \
\text { Contribution margin } & 1,095,000 \
\text { Less: Fixed expenses } & \
\text { ~~Wages } & 684,000 \
\text { ~~Insurance } & 176,800 \
\text { ~~Depreciation } & 294,000 \
\text { ~~Advertising } & \underline{22,000} \
\text { Operating income } & \$ 81,800
\end{array}$ What would be the impact on Knoll's overall operating income if the manufacturing facility is eliminated?

Knoll Manufacturing Has Manufacturing Facilities in Several Locations What Would Be the Impact on Knoll's Overall Operating Income