Problem 4.53 Whispering has been operating two profitable restaurants in Vancouver and Toronto for several years. A year ago, Whispering expanded its business to Montreal, and the Montreal restaurant has been suffering loss since its opening. The annual income statement for last year for the three restaurants is as follows: Revenue Cost of Food Rent (renewal yearly) Utilities Labour costs (paid hourly) Allocated corporate overhead Total Costs Operating income (loss) Vancouver Toronto Montreal $1,207,000 $1,784,000 $801,000 $484,000 $723,000 $363,000 133,000 181,000 141,000 71,000 89,000 85,000 200,000 382,000 186,000 159,000 159,000 159,000 $1,047,000 $1,534,000 $934,000 $160,000 $250,000 $(133,000 ) Total $3,792,000 $1,570,000 455,000 245,000 768,000 477,000 $3,515,000 $277,000 A big portion of the corporate overhead is related to marketing and advertisement. The total overhead costs doubled when French was added to the marketing and advertisement. The corporate overhead costs were evenly allocated to three locations, when the Montreal restaurant was newly added a year ago. Mr. Yamamoto, the owner of Whispering, is considering his options. The first option is to close down the Montreal restaurant. The second option is to keep the Montreal restaurant and open another restaurant of similar size to the operation of the Montreal restaurant in a French language region, such as Moncton, New Brunswick. Your answer is partially correct. Try again. Analyze option 1: Closing the Montreal restaurant independently. By closing down the Montreal restaurant, the total corporate overhead will be reduced by half to the previous level. Should Whispering close the restaurant in Montreal? Net Benefit of closing the Montreal restaurant Whispering should close the Montreal restaurant. LINK TO TEXT LINK TO TEXT Your answer is partially correct. Try again. Analyze option 2: Opening the Moncton restaurant independently. By adding a new restaurant in Moncton, the financial information is similar to the Montreal restaurant, except the cost of food will be $300,150, due to the volume discount and the rent in Moncton will be $99,080 annually. Whispering does not expect to incur additional corporate overhead and the total corporate overhead costs will be evenly allocated to four restaurants. Should Whispering open restaurant in Moncton? Net Benefit of opening the Moncton restaurant Whispering should open the Moncton restaurant. LINK TO TEXT LINK TO TEXT