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Wet Music owns five music stores, where it sells music, instruments, and supplies. In addition, it rents Instruments. At the end of last year,
Wet Music owns five 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 Store Partial Income Statement Sales Cost of goods sold $1,980,000 1,695,000 Gross margin Costs: $ 285,000 Payroll, direct labor, Jand supervision Rentb $156,000 51,300 State taxes 7,800 Depreciationd Insurance on inventory Administration and general office Total costs 58,200 22,800 63,000 Interest for inventory carrying costs 13,800 372,900 Loss $ (87,900) d 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. 8.5% of cost of departmental equipment. The equipment has no salvage value, and Power Music would incur no costs in scrapping it.
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