• The Scenario

The Superman Corporation produces two products: XRAY^TM sunglasses and NightVision^TM reading glasses. This corporation is considering dropping its XRAY sunglasses. If Superman discontinues their sunglasses, the company will close the XRAY factory in Kryptonite, Indiana. The plant, which originally cost $3.5M to build, employs 50 full time manufacturing employees, and eight office workers. The factory is one of the largest employers in town, and it is unlikely that the manufacturing employees will find comparable work within 50 miles. Additionally, since the plant was originally located on the outskirts of town, it was "grandfathered" into the town's new zoning restrictions. Additionally, if the plant is closed, it cannot be sold to another manufacturing company. The land is worth about $150,000.

Data from the company's annual report for last year is listed below.

	Company	XRAY	NightVision
Sales	800,000	400,000	400,000
Variable Manufacturing Costs	440,000	201,000	239,000
Contribution Margin	360,000	199,000	161,000
Traceable Selling & Administration Expenses	184,000	156,000	28,000
Product Line Segment Margin	176,000	43,000	133,000
Common Fixed Costs	248,000
Net Income (loss)	(72,000)

In your original post, answer the following:

• What are the relevant costs?
• What would be the effect on the company's overall net operating income if product XRAY were dropped?
• Should the product be dropped or kept? Why? Support your answer with at least one credible source other than your text.
• Is it in the company's best interest to close the XRAY facility? Why or why not? Be sure to explain your answer.