Question: Can someone help with this? A step by step solution would be nice. The most recent monthly income statement for Benner Stores is given below:
Can someone help with this? A step by step solution would be nice.
The most recent monthly income statement for Benner Stores is given below:
| Total | Store A | Store B | |
| Sales | $1,000,000 | $400,000 | $600,000 |
| Variable expense | 440,000 | 160,000 | 280,000 |
| Contribution margin | 560,000 | 240,000 | 320,000 |
| Traceable fixed expense | 380,000 | 100,000 | 280,000 |
| Store segment margin | 180,000 | 140,000 | 40,000 |
| Common fixed expenses | 220,000 | 90,000 | 130,000 |
| Net operating income | ($40,000) | $50,000 | ($90,000) |
Due to its poor showing, consideration is being given to closing store B. Studies show that is Store B is closed, one-fourth of its traceable fixed expenses will continue unchanged. The studies also show that closing Store B would result in a 10 percent increase in sales in Store A. The company allocates common fixed expenses to the stores on the basis of sales dollars. However, 30% of the common fixed costs can be eliminated if store B closes.
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Determine the monthly financial advantage (disadvantage) of closing Store B.
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What would be your recommendation for Benners management?
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If the one-fourth of Store Bs traceable fixed expenses that remain unchanged are its lease payments, when would you want to reconsider your recommendation from question 2? Why? Show numbers.
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