2. Incremental analysis Information regarding current operations of the Farrell Corporation is given below: $950,000 $450,000 S310,000 Sales Variable Costs Fixed Costs A proposed addition to Farrell's factory is estimated by the sales manager to increase sales by a maximum of $750,000. The company's accountants have determined that the proposed addition will add S320,000 to fixed costs each year. Variable costs are expected to be at the same percentage as they currently are before the proposed addition. (a) Explain why the existing $310,000 of fixed costs is a sunk cost while the $320,000 of fixed costs associated with the proposed addition is an out-of-pocket cost. (b) Calculate by how much the proposed adition will either increase or reduce operating income. Show all work