Perez Market (PM) runs two convenience stores, one in Vancouver and one in Surrey. Operating income for each store in the year follows: (Click the icon to view the operating income for the stores.) The equipment has a remaining useful life of one year and a zero disposal price. In a senior management meeting, Maria Lopez, the management accountant at Perez Market, makes the following comment, "PM can increase its profitability by closing down the Surrey store or by adding more stores like it." Required Requirement 1. Calculate PM's operating income if it closes down the Surrey store. By closing down the store, PM can reduce overall corporate overhead costs by $56,000. Is Maria Lopez correct? Explain. (Enter losses in revenues as a negative amount. Leave cells blank if the cost is not relevant. If the net effect is an operating loss, enter the amount with parentheses or a minus sign.) Incremental Revenue and Savings in Costs from Closing Surrey Store Revenues Operating costs: Cost of goods sold Lease rent (renewable each year) Labour 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 Surrey store correct? Explain. Lopez is that Perez Market's operating income would increase if it closes down the Surrey store as shown by the analysis above. Note that by closing down the Surrey store, Perez Market will save none of the because this is a past cost. Requirement 2. Calculate PM's operating income if it opens another store with revenues and costs identical to those of the Surrey store (including a cost of $26,000 to acquire equipment with a one-year useful life and zero disposal price). Opening this store will increase corporate overhead costs by $5,000. Is Maria Lopez correct? Explain. (If the net effect is an operating loss, enter the amount with parentheses or a minus sign.) Incremental Revenue and Incremental Costs of Opening New Store Revenues Operating costs: Cost of goods sold Lease rent (renewable each year) Labour 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 adding another store like the Surrey store correct? Lopez is that Perez Market's operating income would if it adds another store like the Surrey store as shown by the analysis above. Store operating income Revenues Vancouver Surrey $ 1,100,000 $ 840,000 Operating costs: Cost of goods sold 780,000 670,000 Lease rent (renewable each year) 96,000 80,000 Labour (paid on an hourly basis) 47,000 39,000 Depreciation of equipment 23,000 26,000 Utilities (electricity, heating) 45,000 42,000 50,000 41,000 Allocated corporate overhead Total operating costs 1,041,000 898,000 $ 59,000 $ (58,000) Operating income (loss) Print Done