Knoll Manufacturing Has Manufacturing Facilities in Several Locations

question 188

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.

---

Definitions:

Inductive Reactance

The opposition that inductance offers to alternating current, dependent on the frequency of the current.

Resistance

A measurement of the opposition to the flow of electric current, causing electrical energy to be converted into heat.

Apparent Power

The product of the current and voltage in an AC circuit, measured in volt-amperes, which may differ from the actual power due to phase differences.

Series RL Circuit

A type of electrical circuit that consists of a resistor (R) and an inductor (L) connected in series with each other.