Knoll Manufacturing Has Manufacturing Facilities in Several Locations

question 48

Multiple Choice

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

• A)Increase by $81,800 per year
• B)Decrease by $241,000 per year
• C)Decrease by $226,600 per year
• D)Increase by $322,800 per year

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Definitions:

Negative Income Tax

A welfare system in which individuals earning below a certain income threshold receive supplemental pay from the government instead of paying taxes.

Labor Earnings

Income received by workers for their labor, including wages, salaries, bonuses, and other compensation.

Income Distribution

Income distribution describes how a nation’s total GDP is spread amongst its population, influencing the standard of living and economic inequalities.

Perfectly Equal Distribution

An ideal and theoretical state where all resources or income are distributed evenly among all members of a society.