(Nore: This type of decision is simlar to dropping a product line) Nicholas Company manufactures a fast-bonding glue, normally producing and selling 50,000 litres of the glue each month, This glue, which is known as MJ-7, is used in the wood industry to manufacture plywood. The selling price of MJ7 is $25 per litre, variable costs are $15 per lite, fined manufacturing overhead costs in the plant totail $287,500 per month, and the fixed selling costs total $385,000 per month. Strikes in the mills theit purchase the bulk of the MJ-7 olve have caused Nicholas Company/s sales to temporarily drop to only 12,500 itres per month. Nicholas Company's management estimates that the strikes will iast for two months, after which sales of Mu-7 should return to normal. Due to the current low level of sales, Nicholas Company's management is thinking about closing down the plant during the strike. If Nicholas Company does ciose down the plant, fixed manufacturing overhead costs can be reduced by $75,000 per month and fixed selling costs can be reduced by 10\%, Start-up costs at the end of the shutdown period would total $17,000. Since Nicholns Company uses lean production methods, no inventories are on hand. Required 1-a. Assuming that the strikes continue for two months, compute the increase or decrease in income from closing the plant. 1-b. Would you recommend that Nicholas Company close its own ptant? No Yes 2. At what level of soles (in litres) for the two-month period should Nicholas Company be indifferent between closing the plant and keoping it open? (Hint: This is a type of break-even analysis, except that the fixed-cost portion of your break-even computation should include only those fixed costs that are relevant (i.e, avoidable) over the two-month period)