Sam reviews the performance of his Indian operation with Raja. Their Indian retail business has been very successful overall, but some of the shops have been less successful than others. They consider the profitability of each shop to decide whether they should close those that are not performing so well. Raja runs his operation from a head office in Delhi, costs of which are charged out to stores in proportion to their sales revenue. Based on the information in Table 14.8, which shops should Raja and Sam consider closing and why?

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Table 14.8 Mumbai Indian branches: profitability analysis Delhi million rupees million rupees Calcutta million rupees Sales revenue 31.5 52.2 21.0 Cost of goods sold 12.6 21.0 8.4 Rent of shop 4.4 6.5 5.2 Shop staff 3.5 3.8 3.3 Other shop expenses 4.2 5.1 3.0 Head office allocation 4.5 7.5 2.3 Shop profit/(loss) 2.3 8.3 (1.2)