With almost 110 stores worldwide, Murrys is a leading retailer of furniture, bedding, electrical appliances, and computers. Murrys’ success story began in New Zealand and over the past 15 years, Murrys has expanded its presence with stores in Australia, throughout Europe, and in the United Kingdom. Murrys Northern Ireland (MNI) started trading four years ago and currently has branches in Belfast and Enniskillen. Like all national divisions, MNI is viewed as a profit center within the Murrys group. Each division is expected to yield a minimum annual operating profit margin of 13% and each branch within the division must yield a minimum operating profit margin of 9%.

Ruby Scott, the general manager of MNI, earns a bonus of £5,000 for every 0.5% that the division’s operating profit exceeds the annual target of 13%. This bonus is reduced by 50% if any individual branch in the division has not met the 9% target. If the 13% target is not met, Ruby must explain the division’s performance and set out a plan for corrective action.

The following information is extracted from MNI’s management accounts for 2018:

	Belfast	Enniskillen	Total
	£000	£000	£000
Sales	72,000	48,000	120,000
Variable Costs	45,000	33,000	78,000
Contribution	27,000	15,000	42,000
Branch Fixed Costs	10,800	6,120	16,920
Allocated Divisional Fixed Costs	5,400	3,600	9,000
Operating profit	10,800	5,280	16,080

The opening and closing of new branches within a division is the responsibility of the divisional general manager and group management does not make any special allowances for new branches in performance reviews. Ruby Scott has identified an opportunity to open a branch of MNI in Coleraine in 2019 and has prepared the following notes in relation to this potential branch:

• Sales revenue is estimated at £40,000,000.
• A contribution margin of 40% is expected.
• The annual rental of store premises will be £1,600,000 and other recurring direct costs will be £750,000.
• The fit-out of the store will cost £2,000,000. In accordance with group reporting requirements, this amount must be written off as a direct cost of the branch in the first year of trading.
• The opening of the Coleraine branch would increase the divisional fixed costs by 75% compared to 2018. In compliance with group policy, these costs are allocated between the branches in proportion to revenues.

Budgeted information for 2019 for the Belfast and Enniskillen branches are as follows:

• Sales in the Belfast branch are expected to increase by 5% and will be unaffected by the possible opening of the Coleraine branch. A reduction of sales in Enniskillen of 10% is anticipated if the Coleraine branch opens, whereas the sales decline would only be 3% if the branch did not open.
• Both branches anticipate maintaining their respective contribution margins achieved in 2018.
• A 2.5% increase in fixed costs is expected in both branches.
• Divisional fixed costs are budgeted at the same level as that incurred in 2018 if the Coleraine branch does not come into operation.

Requirement

Complete the figures in the table below to answer the first part of Q4 May 2019. Enter your answers without commas or spaces e.g. 1000 if income or contribution. Enter costs with brackets e.g. (1000).

	£000
Contribution
Direct Fixed Costs
Fit-Out Costs
Increase in Divisional Fixed Costs
Lost Contribution in Enniskillen
Incremental profit/loss