Decision 4 Wool Inc. currently has two retail locations. Store A is located in the downtown core, while Store B is located in the local shopping mall. The most recent monthly income statement for Wool Inc. is given below: Sales Less variable expense Contribution margin Less traceable fixed expense Segment margin Less common fixed expense Operating Income Total Store A Store B $2,100,000 $1,300,000 $800,000 1.260.000 $882.000 378,000 $840,000 $418,000 $422,000 420,000 231.000 189.000 $420,000 $187,000 $233,000 350,000 210,000 140,000 $70,000 $23,000 $93,000 Wool Inc. is considering closing Store A. If Store A is closed, one-fourth of its traceable fixed expenses would continue to be incurred. Store A has also become a space where local crafters come to socialize. The closing of Store A would result in a 20% decrease in sales in Store B as the local crafters would be upset and switch to a different brand. Wool Inc. allocates common fixed expenses on the basis of sales dollars and none of these costs would be saved if a store were shut down. Required: a. Should Wool Inc. close Store A? Show all calculations b. The President of Wool Inc does not understand your recommendation. Briefly support your recommendation by explaining why Store A should be kept open or shut down. G ACCT 5204 - Case Assignment 4 Hawaiian Leis Limited, a distributor of low-cost Hawaiian leis, has an exclusive franchise on the distribution of the leis, and sales have grown so rapidly over the past few years that it has become necessary to add new members to the management team. To date, the company's budgeting practices have been inferior, and at times the company has experienced a cash shortage. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three months, starting April 1. You are eager to make a favourable impression on the president and have assembled the information below. The leis are sold to retailers for $10 each. Recent and forecast sales in units are as follows: January (actual) 20,000 June 50,000 February (actual) 26,000 July 30,000 March (actual) 40,000 August 28,000 April 65,000 September 25,000 May 100,000 The large buildup in sales before and during May is due to Mother's Day. Ending inventories should be equal to 40% of the next month's sales in units, The leis cost the company $4 each. Purchases are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month. All sales are on credit with no discount, and payable within 15 days. The company has found, however, that only 20% of a month's sales are collected by month-end. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible. o The thing and initio 08 C