Abiti D'marchio Enterprise sells brand clothing. The company operates at three different booths allocated at the My Town, Sunway Velocity and 1Shamelin Mall. However, the management is concerned about the continued losses shown by the 1Shamelin Mall Booth and wants a recommendation as to whether or not the operation should be discontinued. A summarized income statement for the booths, for the most recent month is given below: SUNWAY 1SHAMELIN MY TOWN воотH VELOCITY воотн MALL воотH ТOTAL RM RM RM RM Sales revenues Less: Cost of sales 500,000 250,000 250,000 350,000 175,000 175,000 885,000 442,500 442,500 35,000 17,500 Contribution margin 17,500 Less: Fixed Expenses: Booth Assistant Salaries 3,000 3,000 3,000 9,000 Advertising 10,000 14,000 8,000 32,000 Booth rent 10,000 10,000 7,000 27,000 Depreciation of fixtures General expense Total fixed expenses Net operating income (loss) 6,000 5,000 3,000 14,000 12,000 41,000 209,000 13,000 45,000 130,000 10,000 31,000 (13,500) 35,000 117,000 325,500 The following additional information is available: i. The advertising expenses will be allocated for the booth that has sales. If the 1Shamelin Mall booth is closed, all the booth assistants will be transferred to the Town Booth, while the fixtures will be transferred to the Sunway Velocity Booth. i. My Half of the general expense of the 1Shamelin Mall booth could be avoided if the booth is closed and the remaining will be charged under My Town Booth's expenses. ii. It is forecasted that the sales revenues and cost of sales of My Town and Sunway Velocity booth will increased by 10% due to the closing of 1Shamelin Mall booth. iv. Abiti D'marchio will venture into online business if the 1Shamelin Mall booth is closed. The estimation contribution margin from the online sales is RM20,000. V. vi. The following additional expenses will be incurred if the 1Shamelin Mall booth is dlosed: Expenses RM Employee Training Expenses 10,000 E-Commerce platform fees 180 Courier Dropbox rental fees 20 Manager salary 5,000 Clerk salary 1,000 Online workers' salaries 2,000 Postage expenses 1,000 Warehouse rental fees 2,000 Required: Analyse and give your comment whether the 1Shamelin Mall booth should be discontinued. (You are required to prepare the profit statement of the remaining booths and also the TOTAL column amount to support your decision). b. State THREE (3) characteristics of relevant cost.

Abiti D'marchio Enterprise sells brand clothing. The company operates at three different booths allocated at the My Town, Sunway Velocity and 1Shamelin Mall. However, the management is concerned about the continued losses shown by the 1Shamelin Mall Booth and wants a recommendation as to whether or not the operation should be discontinued. A summarized income statement for the booths, for the most recent month is given below: SUNWAY 1SHAMELIN MY TOWN воотH VELOCITY воотн MALL воотH ТOTAL RM RM RM RM Sales revenues Less: Cost of sales 500,000 250,000 250,000 350,000 175,000 175,000 885,000 442,500 442,500 35,000 17,500 Contribution margin 17,500 Less: Fixed Expenses: Booth Assistant Salaries 3,000 3,000 3,000 9,000 Advertising 10,000 14,000 8,000 32,000 Booth rent 10,000 10,000 7,000 27,000 Depreciation of fixtures General expense Total fixed expenses Net operating income (loss) 6,000 5,000 3,000 14,000 12,000 41,000 209,000 13,000 45,000 130,000 10,000 31,000 (13,500) 35,000 117,000 325,500 The following additional information is available: i. The advertising expenses will be allocated for the booth that has sales. If the 1Shamelin Mall booth is closed, all the booth assistants will be transferred to the Town Booth, while the fixtures will be transferred to the Sunway Velocity Booth. i. My Half of the general expense of the 1Shamelin Mall booth could be avoided if the booth is closed and the remaining will be charged under My Town Booth's expenses. ii. It is forecasted that the sales revenues and cost of sales of My Town and Sunway Velocity booth will increased by 10% due to the closing of 1Shamelin Mall booth. iv. Abiti D'marchio will venture into online business if the 1Shamelin Mall booth is closed. The estimation contribution margin from the online sales is RM20,000. V. vi. The following additional expenses will be incurred if the 1Shamelin Mall booth is dlosed: Expenses RM Employee Training Expenses 10,000 E-Commerce platform fees 180 Courier Dropbox rental fees 20 Manager salary 5,000 Clerk salary 1,000 Online workers' salaries 2,000 Postage expenses 1,000 Warehouse rental fees 2,000 Required: Analyse and give your comment whether the 1Shamelin Mall booth should be discontinued. (You are required to prepare the profit statement of the remaining booths and also the TOTAL column amount to support your decision). b. State THREE (3) characteristics of relevant cost.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Transcribed Image Text:Abiti D'marchio Enterprise sells brand clothing. The company operates at three different booths allocated at the My Town, Sunway Velocity and 1Shamelin Mall. However, the management is concerned about the continued losses shown by the 1Shamelin Mall Booth and wants a recommendation as to whether or not the operation should be discontinued. A summarized income statement for the booths, for the most recent month is given below: SUNWAY 1SHAMELIN MY TOWN воотH VELOCITY воотн MALL воотH ТOTAL RM RM RM RM Sales revenues Less: Cost of sales 500,000 250,000 250,000 350,000 175,000 175,000 885,000 442,500 442,500 35,000 17,500 Contribution margin 17,500 Less: Fixed Expenses: Booth Assistant Salaries 3,000 3,000 3,000 9,000 Advertising 10,000 14,000 8,000 32,000 Booth rent 10,000 10,000 7,000 27,000 Depreciation of fixtures General expense Total fixed expenses Net operating income (loss) 6,000 5,000 3,000 14,000 12,000 41,000 209,000 13,000 45,000 130,000 10,000 31,000 (13,500) 35,000 117,000 325,500 The following additional information is available: i. The advertising expenses will be allocated for the booth that has sales. If the 1Shamelin Mall booth is closed, all the booth assistants will be transferred to the Town Booth, while the fixtures will be transferred to the Sunway Velocity Booth. i. My Half of the general expense of the 1Shamelin Mall booth could be avoided if the booth is closed and the remaining will be charged under My Town Booth's expenses. ii. It is forecasted that the sales revenues and cost of sales of My Town and Sunway Velocity booth will increased by 10% due to the closing of 1Shamelin Mall booth. iv. Abiti D'marchio will venture into online business if the 1Shamelin Mall booth is closed. The estimation contribution margin from the online sales is RM20,000. V.

vi.
The following additional expenses will be incurred if the 1Shamelin Mall booth is dlosed:
Expenses
RM
Employee Training Expenses
10,000
E-Commerce platform fees
180
Courier Dropbox rental fees
20
Manager salary
5,000
Clerk salary
1,000
Online workers' salaries
2,000
Postage expenses
1,000
Warehouse rental fees
2,000
Required:
Analyse and give your comment whether the 1Shamelin Mall booth should be discontinued.
(You are required to prepare the profit statement of the remaining booths and also the
TOTAL column amount to support your decision).
b.
State THREE (3) characteristics of relevant cost.

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