Ortiz Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2014 is as follows: (Click to view the operating income for the stores.) The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the management accountant at Ortiz Corporation, makes the following comment, "Ortiz can increase its profitability by closing down the Rhode Island store." Is Maria Lopez Correct? Read the requirements. Requirement 1. By closing down the Rhode Island store, Ortiz can reduce overall corporate overhead costs by $43,000. Calculate Ortiz's operating income if it closes the Rhode Island store. Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. Begin by calculating Ortiz's operating income if it closes the Rhode Island store. (Enter losses in revenues as a negative amount. Enter a "0" if the cost is not relevant. If the net effect is an operating loss enter the amount with parentheses or a minus sign.) (Loss in Revenues) Savings in Costs Revenues Operating costs Cost of goods sold Lease rent (renewable each year) Enter any number in the edit fields and then continue to the next question. ? Lease rent (renewable each year) Labor costs (paid on an hourly basis) Depreciation of equipment Utilities (electricity, heating) Corporate overhead Total operating costs Effect on operating income (loss) Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. Lopez is that Ortiz Corporation's operating income would increase if it closes down the Rhode Island store as shown by the analysis above. i Requirements - 1. By closing down the Rhode Island store, Ortiz can reduce overall corporate overhead costs by $43,000. Calculate Ortiz's operating income if it closes the Rhode Island store. Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. 2. Calculate Ortiz's operating income if it keeps the Rhode Island store open and opens another store with revenues and costs identical to the Rhode Island store (including a cost of $25,000 to acquire equipment with a one-year useful life and zero disposal value). Opening this store will increase corporate overhead costs by $3,000. Is Maria Lopez's statement about the effect of adding another store like the Rhode Island store correct? Explain. Print Done ion's operating income would increase if it closes down the Khode island store as shown by the analysis above. i Data Table Revenues Operating costs Connecticut Store $ 1,150,000 $ Rhode Island Store 860,000 Cost of goods sold 700,000 660,000 Lease rent (renewable each year) 93,000 80,000 Labor costs (paid on an hourly basis) 47,000 41,000 Depreciation of equipment 22,000 25,000 Utilities (electricity, heating) 41,000 45,000 52,000 38,000 Allocated corporate overhead 955,000 889,000 Total operating costs $ 195,000 $ (29,000) Operating income (loss) Print Done