Should the Fifth Avenue store be closed?

	Yes
	No

Power Music owns live music stores, where it sells music, instruments, and supplies. In addition, it rents instruments. At the end of last year, the new accounts showed that although the business as a whole was profitable, the Fifth Avenue store had shown a substantial loss. The income statement for the Fifth Avenue store for last month follows: POWER MUSIC Fifth Avenue Stone Partial Income Statement Sales $1,920,000 Cast of goods soli 1.645,000 Grass margin $ 255,000 Carts: Payroll, direct labor, and supervision $150,000 Rento 45.300 State taxes 7200 Insurance on inventory 52.200 Depreciation 22,200 Administration and general office 57,000 Interest for inventory carrying costs 13,200 Total costs 347,100 Loss $ 192,100) Additional computations: These costs would be saved if the store were closed. The rent would be saved if the store were closed. Assessed annually on the basis of average inventory on hand each month. 18.5% of cost of departmental equipment. The equipment has no salvage value, and Power Music would incur na casts in scrapping it. Allocated on the basis of store sales as a fraction of total company sales. Management estimates that 10% of these costs allocated to the Fifth Avenue store could be saved if the store were closed. Based on average inventory quantity multiplied by the company's borrowing rate for three-month loans. Analysis of these results has led management to consider closing the Fifth Avenue store. Members of the management team agree that keeping the Fifth Avenue store open is not essential to maintaining good customer relations and supporting the rest of the company's business. In other words, eliminating the Fifth Avenue store is not expected to affect the amount of business done by the other stores Required: a. Calculate the cost savings in dosing the Fifth Avenue store Cast savings