Customers’ Delight is a well-known confectionery shop in Chester. The shop has a branch in Coventry, opened only 2 years ago. Both the shops are owned by Henry Brown, who retired recently from the active management of the individual shops due to health reasons. The shops are now managed by newly-appointed managers. In 2020, each had sales of £600,000. The Coventry shop is still pricing lower than the Chester shop to establish a customer base. Variable expenses run 65% of sales for the Chester shop and 70% of sales for the Coventry shop. 

Each manager is responsible for rent and some other fixed costs for his or her shop. These costs amounted to £55,000 for the Chester shop and £37,500 for the one in Coventry. The difference is due to lower rent in Chester. In addition, several costs, such as advertising, legal services, accounting, and personnel services, were centralized. The managers had no control of these expenses, but some of them directly benefited the individual shops. Of the £172,500 cost in this category, £50,000 related to Chester and £92,500 to Coventry, where most of the additional cost in Coventry is due to the cost of extra advertising to build up its customer base. The remaining £30,000 was general corporate overhead.

1. Prepare income statements for each shop and for the company as a whole. Use a format that allows easy assessment of each manager’s performance and each shop’s economic performance. 

2. Using only the information given in this exercise, do the following: 

a. Evaluate each shop as an economic investment.

b. Evaluate each manager.