Question 5 (Shut down decisions) Company E manufactures three products X, Y and Z. The present net annual income from these is as follows: Total $'000 $'000 $'000 $'000 60 150 Variable Costs 25 90 Contribution Fixed Costs Profit/(Loss) Sales 40 30 Company E is concerned about its poor profit performance, and is considering whether or not to cease selling Y. It is felt that selling prices cannot be raised or lowered without adversely affecting net income. $5000 of the fixed costs of Y are direct fixed costs which would be saved if production ceased (that is, there are some attributable fixed costs). All other fixed costs, it is considered, would remain the same. By stopping production of y, it were possible to use the resources realized for the production of a new item U. U, which would sell for $50000 and incur variable costs of $30000 and extra direct fixed costs of $6000. Required: Suggest whether Company E should shut down the production of Y and switch resources to make U. Please explain