Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Sanchez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2014 is as follows: (Click

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Sanchez 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 Sanchez Corporat makes the following comment, "Sanchez can increase its profitability by closing down the Rhode Island store." Is Maria Lopez Correct? Read the reguirements Sanchez'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 Sanchez'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.) Data table Requirements 1. By closing down the Rhode Island store, Sanchez can reduce overall corporate overhead costs by $40,000. Calculate Sanchez'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 Sanchez's operating income if it keeps the Rhode Island store open and opens another store with revenues and costs identical to th Rhode Island store (including a cost of $21,000 to acquire equipment with a one-year useful life and zero disposal value). Opening this store will increase corporate overhead costs by $6,000. Is Maria Lopez's statement about the effect of adding another store like the Rhode Island store correct? Explain. Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. Inne> is that Sanche> Conmeratinn's nneratinn income wnuld increage if it clnces

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing A Practical Approach

Authors: Robyn Moroney, Fiona Campbell, Jane Hamilton

4th Edition

0730382648, 978-0730382645

More Books

Students also viewed these Accounting questions

Question

a valuing of personal and psychological privacy;

Answered: 1 week ago