McKimley Corp., is a manufacturer of automobile components. One of its subdivisions has been experiencing high labor turnover for the past few months and the management has been unable to find suitable replacements for those who quit. The firm is incurring a high average cost of production because the manufacturing overheads are allocated to a lower-than-optimal production level. In fact, the subdivision is starting to incur losses. The operations head at this subdivision is of the opinion that if production costs continue to remain high, the firm might have to shut down this facility.
Which of the following, if true, would support the idea that they may have to shut down?
A. Automobile prices are likely to increase in the short run because of high demand.
B. McKimley Corp., sold one of its auto component units five years back.
C. Cash flows from McKimley's other units would be sufficient to fund this subdivision's operational requirements.
D. A rival firm was recently sued by its creditors on multiple counts of fraud.
E. They cannot make the system more automated in the short run.