Requirement 2. Instead of closing down the Oakland store, Stine Corporation is thinking of opening another...

Transcribed Image Text:

Requirement 2. Instead of closing down the Oakland store, Stine Corporation is thinking of opening another store with revenues and costs identical to the Oakland store (including a cost of $45,000 to acquire equipment with a one-year useful life and zero disposal value). Opening this store will increase corporate overhead costs by $5,000. Should Stine Corporation open another store like the Oakland store? Explain. Begin by calculating Stine's operating income if it keeps the Oakland store open and opens another store with revenues and costs identical to the Oakland store. (If the net effect is an operating loss, enter the amount with parentheses or a minus sign.) Revenues Operating costs Incremental Revenues (Incremental Costs) of Opening New Store Like Oakland Store 1550000 Cost of goods sold -1250000 Variable operating costs (labor, utilities) -110000 Lease rent (renewable each year) -163000 -40500 Depreciation of equipment Allocated corporate overhead Total operating costs Effect on operating income (loss) Requirement 2. Instead of closing down the Oakland store, Stine Corporation is thinking of opening another store with revenues and costs identical to the Oakland store (including a cost of $45,000 to acquire equipment with a one-year useful life and zero disposal value). Opening this store will increase corporate overhead costs by $5,000. Should Stine Corporation open another store like the Oakland store? Explain. Begin by calculating Stine's operating income if it keeps the Oakland store open and opens another store with revenues and costs identical to the Oakland store. (If the net effect is an operating loss, enter the amount with parentheses or a minus sign.) Revenues Operating costs Incremental Revenues (Incremental Costs) of Opening New Store Like Oakland Store 1550000 Cost of goods sold -1250000 Variable operating costs (labor, utilities) -110000 Lease rent (renewable each year) -163000 -40500 Depreciation of equipment Allocated corporate overhead Total operating costs Effect on operating income (loss)