Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

How much is the total income of the company if La Union is discontinued? Malley Sales Company operates three branches in Baguio, Dagupan and La

 image

How much is the total income of the company if La Union is discontinued?


Malley Sales Company operates three branches in Baguio, Dagupan and La Union. When Mr. Sy, the president, reviewed the operations of the three branches, he noted the poor performance of the La Union Branch and is now considering to close it to eliminate the loss. Below are the condensed statements of the three branches: Sales Baguio P300,000 Dagupan La Union P500,000 P20,000 Total P100,000 Cost of Sales 120,000 200,000 8,000 40,000 Gross Profit P180,000 P300,000 P12,000 P60,000 Operating Expenses: Rent P50,000 P80,000 P6,000 P19,000 Advertising 40,000 40,000 4,000 12,000 Salaries 20,000 20,000 2,000 6,000 Other Costs 20,000 20,000 2,000 6,000 Total Expenses P130,000 P160,000 P14,000 P43,000 Profit/ (Loss) P50,000 P140,000 P(2,000) P17,000 The cost of sales is purely variable. Rent and the salaries are directly identifiable with the branch and avoidable once the branch is eliminated. Advertising and other costs are allocated by the main office among the branches.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

To analyze the performance of the La Union Branch and determine whether it should be closed we need ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Economics

Authors: Mark Hirschey

12th edition

9780324584844, 324588860, 324584849, 978-0324588866

More Books

Students also viewed these Accounting questions

Question

What are the consequences of stress?

Answered: 1 week ago

Question

Is times interest earned meaningful for utilities? Why or why not?

Answered: 1 week ago