Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Help pls Required information PR 14-47 (Static) Closing an Unprofitable Department (LO 14-4, 14-5) [The following information applies to the questions displayed below.] Tipton One-Stop
Help pls
Required information PR 14-47 (Static) Closing an Unprofitable Department (LO 14-4, 14-5) [The following information applies to the questions displayed below.] Tipton One-Stop Decorating sells paint and paint supplies, carpet, and wallpaper at a single store location in suburban Des Moines. Although the company has been very profitable over the years, management has seen a significant decline in wallpaper sales and earnings. Much of this decline is attributable to the Internet and to companies that advertise deeply discounted prices in magazines and offer customers free shipping and toll-free telephone numbers. Recent figures follow. Tipton is studying whether to drop wallpaper because of the changing market and accompanying loss. If the line is dropped, the following changes are expected to occur: - The vacated space will be remodeled at a cost of $12,400 and will be devoted to an expanded line of high-end carpet. Sales of carpet are expected to increase by $120,000, and the line's overall contribution margin ratio will rise by five percentage points. - Tipton can cut wallpaper's fixed costs by 40 percent. Remaining fixed costs will continue to be incurred. - Customers who purchased wallpaper often bought paint and paint supplies. Sales of paint and paint supplies are expected to fall by 20 percent. - The firm will increase advertising expenditures by $25,000 to promote the expanded carpet line. R 14-47 (Static) Part 1: Calculate the income or loss if Tipton closes its wallpaper operation. lequired: -a. Calculate the change in income if Tipton closes its wallpaper operation. -b. Should Tipton close its wallpaper operation? . Assume that Tipton's wallpaper inventory at the time of the closure decision amounted to $23,700. How would you have treated dditional information in making the decision? What advantages might Internet- and magazine-based firms have over Tipton that would allow these organizations to offer deepl iscounted prices-prices far below what Tipton can offer? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Calculate the change in income if Tipton closes its wallpaper operationStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started