Debbie Company has a single product called a Zak. The company normally produces and sells 60,000 Zaks each year at a selling price of $32 per unit. The companys unit costs at this level of activity are given below:

Variable costs (per unit):

Direct materials $10.00

Direct labor 4.50

Variable manufacturing overhead 2.30

Variable selling expenses 1.20

Fixed Costs (per year)

Fixed manufacturing overhead $300,000

Fixed selling expenses $210,000

Due to a strike in its suppliers plant, Debbie Company is unable to purchase more material for the production of Zaks. The strike is expected to last for two months. Debbie Company has enough material on hand to operate at 30% of normal levels for the two-month period. Production is even each month; Debbie normally produces 5,000 units per month. As an alternative, Debbie could close its plant down entirely for two months. If the plant were closed, fixed manufacturing overhead costs would continue at 60% of their normal level during the two-month period and the fixed selling expense would be reduced by 20%. How much better off is the company to continue to operate at 30% of normal levels for two months? (Assume that fixed costs are incurred evenly throughout the year).

a. $16,500

b. $27,600

c. $96,000

d. $42,000

e. $15,000**

Answer is E, but why?