Question
The data for Cosmo Inc. is as below: Mall Store Town Store Sales $80,000 $120,000 Variable expenses 32,000 84,000 Fixed expenses 20,000 40,000 Net operating
The data for Cosmo Inc. is as below:
| Mall Store | Town Store | |
| Sales | $80,000 | $120,000 |
| Variable expenses | 32,000 | 84,000 |
| Fixed expenses | 20,000 | 40,000 |
| Net operating income | $28,000 | -$4,000 |
The managers are considering whether to close the Town Store.
If the Town Store were to be closed, 60% of Town Store's fixed expenses will be avoided, but Mall Store sales will decrease by 5%.
By how much would closing the Town Store affect the company's net operating income?
Net operating income will decrease by $12,000
Net operating income will decrease by $30,400
Net operating income will decrease by $14,400
Net operating income will increase by $4,000
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Cost management a strategic approach
Authors: Edward J. Blocher, David E. Stout, Gary Cokins
5th edition
73526940, 978-0073526942
