GST Corporation runs two convenience stores, one in Minneapolis and one in

St. Paul. Operating income for each store in 20132013 is as follows:

	Minneapolis Store	St. Paul Store
Revenues	$2,140,000	$1,720,000
Operating costs
Cost of goods sold	1,500,000	1,320,000
Lease rent (renewable each year)	180,000	150,000
Labor costs (paid on an hourly basis)	84,000	84,000
Depreciation of equipment	50,000	44,000
Utilities (electricity, heat)	86,000	92,000
Allocated corporate overhead	100,000	80,000
Total operating costs	2,000,000	1,770,000
Operating income (loss)	$140,000	($50,000)

The equipment has a zero disposal value. In a senior management meeting, Larsen,

the management accountant at GST Corporation, makes the following comment,

"GST can increase its profitability by closing down the St. Paul store or by adding another store like it."

...

.

Requirement

By closing down the Paul store, GST can reduce overall corporate overhead costs by $88,000. Calculate GST's operating income if it closes the St. Paul store. Is Sven Larsen Sven statement about the effect of closing the St. Paul store correct? Explain.

Calculate GST's operating income if it closes the St. Paul store.

(Enter losses in revenues as a negative amount. Enter a zero if the cost is not relevant. If the net effect is an operating loss enter the amount with parentheses or a minus sign.)