Answered step by step
Verified Expert Solution
Question
1 Approved Answer
1) The most recent monthly income statement for Benner Stores is given below: Total Store A Store B Sales $1,000,000 $400,000 $600,000 Variable expenses 580,000
| 1) The most recent monthly income statement for Benner Stores is given below: | |||||||||
| Total | Store A | Store B | |||||||
| Sales | $1,000,000 | $400,000 | $600,000 | ||||||
| Variable expenses | 580,000 | 160,000 | 420,000 | ||||||
| Contribution margin | 420,000 | 240,000 | 180,000 | ||||||
| Traceable fixed expenses | 300,000 | 100,000 | 200,000 | ||||||
| Store segment margin | 120,000 | 140,000 | -20,000 | ||||||
| Common fixed expenses | 50,000 | 20,000 | 30,000 | ||||||
| Net operating income | $70,000 | $120,000 | -$50,000 | ||||||
| Due to its poor showing, consideration is being given to closing Store B. Studies show that if Store B is closed, one-fourth of its traceable fixed expenses will continue unchanged. The studies also show that closing Store B would result in a 10 percent decrease in sales in Store A. The company allocates common fixed expenses to the stores on the basis of sales dollars. | |||||||||
| Required: | |||||||||
| Determine the monthly financial advantage (disadvantage) of closing Store B. | |||||||||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started