Nunez Corporation runs two convenience stores, one in Minneapolis and one in Bos
ID: 2523085 • Letter: N
Question
Nunez Corporation runs two convenience stores, one in Minneapolis and one in Boston. Operating income for each store in 2013 is as follows (Click to view the operating income for the stores.) The equipment has a zero disposal value. In a senior management meeting,Evan Smith, the management accountant at Nunez Corporation, makes the following comment, "Nunez can increase its profitability by closing down the Boston store or by adding ancther store like it Read the requirements Data Table Requirement 1. By closing down the Boston store, Nunez can reduce overall corporate overhead costs by $51,000. Calculate Nunez'soperating income if it correct? Explain. Calculate Nunezs operating income iicses thquements 1,090.DODS 860,000 Revenues Sa Operating costs 1. By closing down the Boston store, Nunez can reduce overall corporate overhead costs by Cost of goods sold Lease rent (renewable each year) Labor costs (paid on an hourly basis) Depreciation of equipment Utilities (electricity, heat) Allocated corporate overhead 700, 96, 44, 26, 38, 54 958, 700,000 77,000 38,000 18,000 53,000 45,000 931,000 71,000) Revenues S51,000. Calculate Nunez's operating income if it closes the Boston store. Is Evan Smith's statement about the effect of closing the Boston store correct? Explain Operating costs 2. Calculate Nunez's aperating income if it keeps the Boston store open and opens another store Cost of goods sold Lease rent (renewable each year) Labor costs (paid on an hourly basis) Depreciation of equipment Utilities (electricity, heat) with revenues and costs identical to the Boston store (including a cost of S18,000 to acquire equipment with a 1-year useful life and zero disposal value). Opening this store will increase corporate overnead costs by $6,000. Is Evan Smith's statement about the effect of adding another store like the Boston store correct? Explain Total operating costs Print Done 132,000 S Enter any number in the edit fields and then cli Operating income (loss)Explanation / Answer
If we close the Boston store our Operating Income will increase 77,000. So the statement is correct.
By opening the new store our Operating Income is getting Reduced by 32000. So, the statement is not correct.
1 Minneapolis Store Revenue 1,090,000.00 Operating Costs: COGS 700,000.00 Lease rent 96,000.00 Labour Cost 44,000.00 Depreciation of Equipment 26,000.00 Utilities 38,000.00 Corporate Overhead 48,000.00 Total Operating Cost 952,000.00 Operating income(Loss) 138,000.00Related Questions
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