How much is the total income of the company if La Union is discontinued? Malley Sales Company

 

How much is the total income of the company if La Union is discontinued?

Transcribed Image Text:

Malley Sales Company operates three branches in Baguio, Dagupan and La Union. When Mr. Sy, the president, reviewed the operations of the three branches, he noted the poor performance of the La Union Branch and is now considering to close it to eliminate the loss. Below are the condensed statements of the three branches: Sales Baguio P300,000 Dagupan La Union P500,000 P20,000 Total P100,000 Cost of Sales 120,000 200,000 8,000 40,000 Gross Profit P180,000 P300,000 P12,000 P60,000 Operating Expenses: Rent P50,000 P80,000 P6,000 P19,000 Advertising 40,000 40,000 4,000 12,000 Salaries 20,000 20,000 2,000 6,000 Other Costs 20,000 20,000 2,000 6,000 Total Expenses P130,000 P160,000 P14,000 P43,000 Profit/ (Loss) P50,000 P140,000 P(2,000) P17,000 The cost of sales is purely variable. Rent and the salaries are directly identifiable with the branch and avoidable once the branch is eliminated. Advertising and other costs are allocated by the main office among the branches. Malley Sales Company operates three branches in Baguio, Dagupan and La Union. When Mr. Sy, the president, reviewed the operations of the three branches, he noted the poor performance of the La Union Branch and is now considering to close it to eliminate the loss. Below are the condensed statements of the three branches: Sales Baguio P300,000 Dagupan La Union P500,000 P20,000 Total P100,000 Cost of Sales 120,000 200,000 8,000 40,000 Gross Profit P180,000 P300,000 P12,000 P60,000 Operating Expenses: Rent P50,000 P80,000 P6,000 P19,000 Advertising 40,000 40,000 4,000 12,000 Salaries 20,000 20,000 2,000 6,000 Other Costs 20,000 20,000 2,000 6,000 Total Expenses P130,000 P160,000 P14,000 P43,000 Profit/ (Loss) P50,000 P140,000 P(2,000) P17,000 The cost of sales is purely variable. Rent and the salaries are directly identifiable with the branch and avoidable once the branch is eliminated. Advertising and other costs are allocated by the main office among the branches.

Answer rating: 100% (QA)

To analyze the performance of the La Union Branch and determine whether it should be closed we need ... View the full answer