You have been engaged to assist the management of the Arcadia Corporation in arriving at certain decisions. Arcadia has its home office in Ohio and leases factory buildings in Texas, Montana and Maine, all of which produce the same product. The management of Arcadia has provided you with a projection of operations for 20X2, the forthcoming year, as follows:

Due to the marginal results of operations of the factory in Maine, Arcadia has decided to cease operations and sell that factory's machinery and equipment by the end of \(20 \mathrm{X} 1\). Arcadia expects that the proceeds from the sale of these assets would be greater than their book value and would cover all termination costs.
Arcadia, however, would like to continue serving its customers in that area if it is economically feasible and is considering one of the following three alternatives:
(1) Expand the operations of the Montana factory by using space presently idle. This move would result in the following changes in that factory's operations:

{Required:}
In order to assist the management of Arcadia Corporation in determining which alternative is more economically feasible, prepare a schedule computing Arcadia's estimated net profit from total operations that would result from each of the following methods:

(a) Expansion of the Montana factory.

(b) Negotiation of long-term contract on a royalty basis.

(c) Shutdown of Maine operations with no expansion at other locations.
Total home office costs of \(\$ 500,000\) will remain the same under each situation.

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Total Texas Montana Maine 1,100,000 350,000 Sales. Fixed costs:. Factory Administration.... $4,400,000 $2,200,000 $1,400,000 $800,000 560,000 280,000 260,000 210,000 110,000 30,000 Variable costs.. 1,450,000 665,000 425,000 360,000 Allocated home office costs....... 500,000 225,000 175,000 100,000 Total 3,400,000 1,660,000 990,000 750,000 Nel profit from operations....... $1,000,000 $540,000 $410,000 $ 50,000 The sales price per unit is $25