Di PH Grade Assist 11-25 Closing and opening stores. Sanchez Corporation runs two convenience stores Connecticut and one in Rhode Island. Operating income for each store in 2007 is as follows: Connecticut Rhode Island Store Store Revenues $1,070,000 $860,000 Operating costs Cost of goods sold 750,000 660,000 Lease rent (renewable each year) 90,000 75,000 Labor costs (paid on an hourly basis) 42,000 42,000 Depreciation of equipment 25,000 22,000 Utilities (electricity, heating) 43,000 46,000 Allocated corporate overhead 50,000 40,000 Total operating costs 1,000,000 885,000 Operating income (loss) $ 70,000 $125,000) The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the management accountant at Sanchez Corporation, makes the following comment, "Sanchez can increase its profitar by closing down the Rhode Island store or by adding another store like it." 1. By closing down the Rhode Island store, Sanchez can reduce overall corporate overhead cos $44,000. Calculate Sanchez's operating income if it closes the Rhode Island store. Is Maria Lu statement about the effect of closing the Rhode Island store correct? Explain. 2. Calculate Sanchez's operating income if it keeps the Rhode Island store open and opens an with revenues and costs identical to the Rhode Island store (including a cost of $22,000 equipment with a one-year useful life and zero disposal value). Opening this store willing rate overhead costs by $4,000. Is Maria Lopez's statement about the effect of adding anoun the Rhode Island store correct? Explain. Required nd opens anothers ost of $22,000 to acquit Store will increase corp ding another store like