Burrito Burro has been operating two take-outs burrito restaurants and two food trucks in Miami for the past few years. Food preparation and storage for the restaurants and food trucks happens in the restaurants. In am attempt to improve the company's overall financial performance, Bob Burro, the owner, is considering whether he should close the restaurants. The contribution income statement for the restaurants is shown below.

Burrito Burro Contribution Income Statement For the Year Ended December 31, 2019

Restaurants Revenue $ 1,275,000 Less: Variable Costs $ 900,000 Contribution Margin $ 375,000 Less: Fixed Costs $ 400,000 Income from Operations $ (25,000)

If the restaurants are closed, Burrito Burro will have to rent kitchen space to assist with food production and storage, so 60% of the segments fixed costs would remain with the company. The remaining fixed costs would no longer be incurred if the restaurants are closed. Should the restaurants segment be discontinued or retained?

AP-5B Requirements: Provide documentation and reasoning for this question: Should the restaurants segment be discontinued or retained?

Calculations:

Written response: