Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Cats Shop Here is a retailer in British Columbia. The most recent monthly income statement for Cats Shop Here is given below: Store A Store

Cats Shop Here is a retailer in British Columbia. The most recent monthly income statement for Cats Shop Here is given below: Store A Store B Total Sales $1,300,000 $1,665,000 $2,965,000 Less variable expense 850,000 $958,000 1,808,000 Contribution margin $450,000 $707,000 $1,157,000 Less traceable fixed expense 430,000 378,000 808,000 Segment margin $20,000 $329,000 $349,000 Less common fixed expense 120,000 140,000 260,000 Operating Income $(100,000) $189,000 $89,000 Cats Shop Here is considering closing Store A. If Store A is closed, one-fourth of its traceable fixed expenses would continue to be incurred. Also, the closing of Store A would result in a 20% increase in sales in Store B as loyal shoppers are expected to travel to shop at Store B if Store A is closed. Cats Shop Here allocates common fixed expenses on the basis of sales dollars and none of these costs would be saved if a store were shut down. QUESTION 1 Should Cats Shop Here close Store A? (Show all calculations) (6 points) QUESTION 2 What is the decision rule for this type of scenario? (1 point)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions

Question

=+applying to all or most employers and employees?

Answered: 1 week ago