Question: 2B Drop or Retain a Segment Fresh Juice has three locations in Kamloops: Downtown, North Shore and Dufferin. Management is concerned about the performance of

2B Drop or Retain a Segment Fresh Juice has three locations in Kamloops: Downtown, North Shore and Dufferin. Management is concerned about the performance of the downtown location, the rent is high and management is debating closing the store. A company-wide segmented income statement follows: Sales Variable expenses Downtown $300,000 210,000 North Shore $350,000 225,000 Dufferin $250,000 175,000 75,000 Total $900,000 610.000 290,000 Contribution margin 90,000 125,000 Fixed expenses Operating income (loss) 150,000 $(60,000) 75,000 $50,000 40,000 $35,000 265,000 $25,000 An analysis of expenses reveals that if $40,000 of the downtown location's fixed expenses are allocated costs that would continue even if the store was closed. The North Shore and Dufferin locations could expect a 5% decrease in revenues due to lost promotional synergies closing the prominent downtown location. Required Compute the net dollar advantage or disadvantage of dropping the downtown location
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
