I am having issues with understanding this problem. Would anyone be able to help me with this please?

You have been asked to assist the management of Ironwood Corporation in arriving at certain decisions. Ironwood has its home office in Michigan and leases factory buildings in Wisconsin, Minnesota, and North Dakota, all of which produce the same product. Ironwood's management provided you with a projection of operations for next year, as follows.

	Total			Wisconsin			Minnesota			North Dakota
Sales revenue	$	894,000		$	441,000		$	284,000		$	169,000
Fixed costs
Factory		218,000			113,000			50,000			55,000
Administration		66,000			39,000			22,000			5,000
Variable costs		291,000			137,000			87,000			67,000
Allocated home office costs		102,000			46,000			36,000			20,000
Total	$	677,000		$	335,000		$	195,000		$	147,000
Operating profit	$	217,000		$	106,000		$	89,000		$	22,000

The sales price per unit is $5.

Due to the marginal results of operations of the factory in North Dakota, Ironwood has decided to cease its operations and sell that factory's machinery and equipment by the end of this year. Ironwood expects that the proceeds from the sale of these assets would equal all termination costs. Ironwood, however, would like to continue serving most of its customers in that area if it is economically feasible and is considering one of the following three alternatives:

Expand the operations of the Minnesota factory by using space presently idle. This move would result in the following changes in that factory's operations.

Increase over Minnesota factory's current operations
Sales revenue	50	%
Fixed costs
Factory	19
Administration	10

Under this proposal, variable costs would be $2 per unit sold.

Enter into a long-term contract with a competitor that will serve that area's customers. This competitor would pay Ironwood a royalty of $1 per unit based on an estimate of 28,000 units being sold.

Close the North Dakota factory and not expand the operations of the Minnesota factory.

Total home office costs of $102,000 will remain the same under each situation.

Required:

To assist the management of Ironwood Corporation, complete the following schedule computing Ironwood's estimated operating profit from each of the following options:

a. Expansion of the Minnesota factory.

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

c. Shutdown of the North Dakota operations with no expansion at other locations.