5 (20 minutes) Sanchev Company runs two convenient stores, one in Vancouver and one in Surrey Operating income for each store in 2021 is detailed below. Revenues Expenses Cost of goods sold Vancouver Store. $1,070,000 Surrey Store $875,000 750,000 660,000 90,000 75,000 Lease rent (renewable each year) 42,000 42,000 labor costs (paid on an hourly basis) 25,000 22,000 Depreciation of equipment 43,000 46,000 Utilities (electricity, heating) 50.000 40.000 Allocated corporate overhead 1,000,000 885,000 Total Expenses Operating Income (Loss) S 70.000 $ (10.000) The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the management accountant at Sanchev Company, makes the following comment, "Sanchev can increase its profitability by closing down the Surrey store or by adding another store like it." Required a. By closing the Surrey store, Sanchev can reduce overall corporate overhead costs by $44,000. Calculate Sanchev's operating income if it closes the Surrey store. Is Maria Lopez's statement about the effect of closing the Surrey store correct? Explain. (5 marks) b. Calculate Sanchev's operating income if it keeps the Surrey store open and opens another store with revenues and costs identical to the Surrey store (including a cost of $22,000 to Opening this 060,000 Lost of goods sold 90,000 75,000 Lease rent (renewable each year). 42,000 42,000 labor costs (paid on an hourly basis) 25,000 22,000 Depreciation of equipment 43,000 46,000 Utilities (electricity, heating) 50.000 40.000 Allocated corporate overhead 1,000,000 885.000 Total Expenses Operating Income (Loss) S 70.000 $ (10,000) The equipment has a zero disposal value. In a senior management meeting. Maria Lopez, the management accountant at Sanchev Company, makes the following comment, "Sanchev can increase its profitability by closing down the Surrey store or by adding another store like it." Required a. By closing the Surrey store, Sanchev can reduce overall corporate overhead costs by $44,000 Calculate Sanchev's operating income if it closes the Surrey store. Is Maria Lopez's statement about the effect of closing the Surrey store correct? Explain. (5 marks) 6. Calculate Sanchev's operating income if it keeps the Surrey store open and opens another store with revenues and costs identical to the Surrey store (including a cost of $22,000 to acquire equipment with a one-year useful life and zero disposal value). Opening this store will increase corporate overhead costs by $4,000. Is Maria Lopez's statement about the effect of adding another store like the Surrey store correct? Explain