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Northern Stores is a retailer in British Columbia. The most recent monthly statements are below. Northern is considering closing Store I. If it is
Northern Stores is a retailer in British Columbia. The most recent monthly statements are below. Northern is considering closing Store I. If it is closed one quarter of its traceable fixed expenses would continue to be incurred. Also the closing of Store I would result in a 20% decrease in sales in Store II. Northern allocated common fixed expenses on the basis of sales dollars, none of which would be saved it a store shuts down. Northern Stores Total Store I Store II Sales S 2,100,000 $ 1,300,000 $ 800,000 Variable Expenses 1,260,000 882,000 378,000 Contribution Margin 840,000 418,000 422,000 Traceable Fixed expenses 420,000 231,000 189,000 Common expenses allocated 350,000 210,000 140,000 Operating Income/Loss 70,000 $ (23,000) S 93,000 Required: Recommend which store, if any, should be eliminated. Prepare a report in good form to support your answer.
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