QUESTION 5 (11 marks, 22 minutes) As a direct result of the economic slow-down management of Birch Company is considering shutting down its Red Deer manufacturing plant. Sales have recently dropped to only 9,000 batteries each month. The company normally produces and sells 28,000 batteries each month. The good news is that the slow-down is temporary; it is expected to last for only two months, after which sales of the batteries should return to the normal level of 28,000 per month. The selling price of one battery is $32 per unit, variable expenses are $21 per unit. Fixed overhead costs in the plant total $212,000 per month and the fixed selling costs total $275,000 per month. If Birch Company closes down the Red Deer plant, it is estimated that fixed overhead costs can be reduced to only $150,000 per month and that fixed selling costs can be reduced by ten per cent. Start-up costs at the end of the shutdown period would total $11,000. No inventories are on hand. REQUIRED: 1. Assuming that the slowdown continues for two months, as estimated, would you recommend that Birch Company close the Red Deer plant? What will be the impact on operating income of shutting down? 2. At what level of sales would the company be indifferent about closing down for 2 months or staying open