Company ABJ has 3 manufacturing plants. Plant A was built specifically for Company ABJ's manufacturing process.

Plant B and C are smaller facilities and are rented. The financial statements of each manufacturing plants show the following:

Net Sales Variable Costs Fixed Costs SG:&A Net Income

Plant A $10,000,000 $2,000,000 $7,000,000 $2,000,000 $(1,000,000)

Plant B $ 2,000,000 $1,500,000 $ 300,000 $ 150,000 $ 50,000

Plant C $ 1,500,000 $1,125,000 $ 300,000 $ 55,000 $ 20,000

An analysis of Plant A's fixed cost indicates that $6,500,000 of the cost is due to depreciation expense.

One executive of the company is promoting the idea to close Plant A and move that production activity to the other 2 manufacturing plants. However, neither of these sites has the space to accommodate the additional space requirements and therefore more space would need to be rented.

What would you respond to the idea of closing Plant A? What analysis should be completed to identify the best decision for the company? What recommendations would you make?