East Meets West Ltd. operates two stores, one in Victoria and another in Halifax. The following income statements were prepared for the most recent year:

The store equipment and leasehold improvements have no market value. The building leases can be cancelled without penalty.

Required:

1) Calculate the dollar value of sales required for each store to break-even assuming that all of the fixed costs are to be covered?

2) Should management close the Halifax store? Assume that corporate overhead would be reduced by $100,000 if the Halifax store is closed.

		Victoria	Halifax
Net Sales		$ 3,780,000	$ 960,000
Variable costs:
Cost of goods sold		1,512,000	528,000
Sales Commission		189,000	48,000
Utilities		17,200	15,300
Contribution Margin		$ 2,061,800	$ 368,700
Fixed costs:
Annual Building lease		84,000	39,000
Salaries		380,000	180,000
Allocated corporate overhead		750,000	250,000
Amortization of store equipment & leasehold improvements		60,000	30,000
Operating Income (loss)		$ 787,800	-$ 130,300