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Eastern Clothing has two locations. The most recent income statement is as follows: (in Smillions) Ansonville Bampton Total Sales 40 10 50 Variable Costs 22
Eastern Clothing has two locations. The most recent income statement is as follows: (in Smillions) Ansonville Bampton Total Sales 40 10 50 Variable Costs 22 3 25 Contribution Margin 18 7 25 Fixed Costs (note 1) 12 12 24 Operating Income 6 (5) Note 1: Fixed costs for Bampton include $3 in depreciation for equipment - The equipment has no disposal value. Fixed costs include $8 in corporate costs (allocated as $4 to each store). Eastern is considering closing its Bampton store. If Bampton is closed, the following will likely occur: A. Sales at Ansonville will increase by 10% B. Overall corporate costs will be reduced from $8 to $6 C. Ansonville will have to rent more space - this will increase rent from $3 to $4 per year Required: Compute net income if Eastern Stores closes the Bampton location
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