Vancouver Surrey 830,000 Revenues $ 1,090,000 $ 750,000 650,000 70,000 Operating costs: Cost of goods sold Lease rent (renewable each year) Labour (paid on an hourly basis) Depreciation of equipment Utilities (electricity, heating) Allocated corporate overhead Total operating costs 95,000 44,000 27,000 45,000 48,000 41,000 26,000 52,000 40,000 1,009,000 879,000 $ 81,000 $ (49,000) Operating income (loss) Answer the following questions referring to the data provided. 1. Calculate SM's operating income if it closes down the Surrey store. By closing down the store, SM can reduce overall corporate overhead costs by $52,000. Is Maria Lopez correct? Explain. 2. Calculate SM's operating income if it opens another store with revenues and costs identical to those of the Surrey store (including a cost of $26,000 to acquire equipment with a one-year useful life and zero disposal price). Opening this store will increase corporate overhead costs by $3,000. Is Maria Lopez correct? Explain. Suarez Market (SM) runs two convenience stores, one in Vancouver and one in Surrey. Operating income for each store in the year follows: Click the icon to view the operating income for the stores.) The equipment has a remaining useful life of one year and a zero disposal price. In a senior management meeting, Maria Lopez, the management accountant at Suarez Market, makes the following comment, "SM can increase its profitability by closing down the Surrey store or by adding more stores like it." Required Requirement 1. Calculate SM's operating income if it closes down the Surrey store. By closing down the store, SM can reduce overall corporate overhead costs by $52,000. Is Maria Lopez correct? Explain. (Enter losses in revenues as a negative amount. Leave cells blank if the cost is not relevant. If the net effect is an operating loss, enter the amount with parentheses or a minus sign.) Incremental Revenue and Savings in Costs from Closing Surrey Store $ Revenues (830,000 650,000 70,000 Operating costs: Cost of goods sold Lease rent (renewable each year) Labour costs (paid on an hourly basis) Depreciation of equipment Utilities (electricity, heating) 41,000 52,000 Corporate overhead 52,000 Total operating costs Effect on operating income (loss)