MyCarShop is a chain of used car-dealers with showrooms in Leicester, Derby and Chesterfield and a separate Head Office. The management accountant is reviewing the profitability of each showroom. The rent and staff costs incurred by each showroom can be saved in the event of closure. Marketing costs are allocated to each showroom, but would not be saved, if any shop were to close. Head office cost is charged at a rate of 7% of sales. The data regarding costs and sales revenues for each showroom are presented below. £000 Leicester Derby Chesterfield Sales 1,500 1,375 1,230 Cost of sales 1,250 1,240 1,184 Rent of showroom 50 67 78 Showroom staff salaries 21 28 12 Marketing costs 45 22 18 Which showroom/s should be closed down? a. Only Chesterfield. b. Derby and Chesterfield. c. Only Derby. d. Leicester and Derby.
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MyCarShop is a chain of used car-dealers with showrooms in Leicester, Derby and Chesterfield and a separate Head Office. The
management accountant is reviewing the profitability of each showroom. The rent and staff costs incurred by each showroom can be saved in the event of closure. Marketing costs are allocated to each showroom, but would not be saved, if any shop were to close. Head office cost is charged at a rate of 7% of sales.The data regarding costs and sales revenues for each showroom are presented below.
£000
Leicester
Derby
Chesterfield
Sales
1,500
1,375
1,230
Cost of sales
1,250
1,240
1,184
Rent of showroom
50
67
78
Showroom staff salaries
21
28
12
Marketing costs
45
22
18
Which showroom/s should be closed down?
a. Only Chesterfield.
b. Derby and Chesterfield.
c. Only Derby.
d. Leicester and Derby.
Answer:
Let do each analysis
| Leicester | Derby | Chesterfield | Overall Profit | |
| Sales | 1,500 | 1,375 | 1,230 | |
| Cost of sales | 1,250 | 1,240 | 1,184 | |
| Gross profit/ loss | 250 | 135 | 46 | |
| Rent of showroom | 50 | 67 | 78 | |
| Showroom staff salarie | 21 | 28 | 12 | |
| Marketing costs | 45 | 22 | 18 | |
| Head Office cost | 105 | 96 | 86 | |
| Net profit / loss | 29 | (78) | (148) | (197) |
When chesterfield is closed:
| Leicester | Derby | Chesterfield | Overall Profit | |
| Sales | 1,500 | 1,375 | ||
| Cost of sales | 1,250 | 1,240 | ||
| Gross profit/ loss | 250 | 135 | ||
| Rent of showroom | 50 | 67 | ||
| Showroom staff salarie | 21 | 28 | ||
| Marketing costs | 45 | 22 | 18 | |
| Head Office cost | 105 | 96 | - | |
| Net profit / loss | 29 | (78) | (18) | (67) |
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