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Nunez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2014 is as follows: E (Click to view the operating income for the stores.) The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the management accountant at Nunez Corporation, makes the following comment, "Nunez can increase its profitability by closing down the Rhode Island store." Is Maria Lopez Correct? Read the requirements. Requirement 1. By closing down the Rhode Island store, Nunez can reduce overall corporate overhead costs by $45,000. Calculate Nunez's operating income if it closes the Rhode Island store. Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. Begin by calculating Nunez's operating income if it closes the Rhode Island store. (Enter losses in revenues as a negative amount. Enter a "0" if the cost is O Data Table (Loss in Revenues) Savings in Costs Revenues Connecticut Store Rhode Island Store Operating costs 2$ 1,100,000 $ 840,000 Revenues Cost of goods sold Operating costs Lease rent (renewable each year) Cost of goods sold 780,000 640,000 Labor costs (paid on an hourly basis) Lease rent (renewable each year) 89,000 78,000 Depreciation of equipment Labor costs (paid on an hourly basis) 50,000 38,000 Utilities (electricity, heating) Depreciation of equipment 23,000 22,000 Corporate overhead Utilities (electricity, heating) 43,000 50,000 Total operating costs 50,000 38,000 Allocated corporate overhead Effect on operating income (loss) 1,035,000 866,000 Total operating costs Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. 65,000 S (26,000) Operating income (loss) Lopez is V that Nunez Corporation's operating income would increase if it closes down the Rhode Island store as shown by the analysis above. Print Done

Nunez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2014 is as follows: E (Click to view the operating income for the stores.) The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the management accountant at Nunez Corporation, makes the following comment, "Nunez can increase its profitability by closing down the Rhode Island store." Is Maria Lopez Correct? Read the requirements. Requirement 1. By closing down the Rhode Island store, Nunez can reduce overall corporate overhead costs by $45,000. Calculate Nunez's operating income if it closes the Rhode Island store. Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. Begin by calculating Nunez's operating income if it closes the Rhode Island store. (Enter losses in revenues as a negative amount. Enter a "0" if the cost is O Data Table (Loss in Revenues) Savings in Costs Revenues Connecticut Store Rhode Island Store Operating costs 2$ 1,100,000 $ 840,000 Revenues Cost of goods sold Operating costs Lease rent (renewable each year) Cost of goods sold 780,000 640,000 Labor costs (paid on an hourly basis) Lease rent (renewable each year) 89,000 78,000 Depreciation of equipment Labor costs (paid on an hourly basis) 50,000 38,000 Utilities (electricity, heating) Depreciation of equipment 23,000 22,000 Corporate overhead Utilities (electricity, heating) 43,000 50,000 Total operating costs 50,000 38,000 Allocated corporate overhead Effect on operating income (loss) 1,035,000 866,000 Total operating costs Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. 65,000 S (26,000) Operating income (loss) Lopez is V that Nunez Corporation's operating income would increase if it closes down the Rhode Island store as shown by the analysis above. Print Done

FINANCIAL ACCOUNTING
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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Nunez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2014 is as follows: (Click to view the operating income for the stores.) The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the management accountant at Nunez Corporation, makes the following comment, "Nunez can increase its profitability by closing down the Rhode Island store." Is Maria Lopez Correct? Read the requirements. Requirement 1. By closing down the Rhode Island store, Nunez can reduce overall corporate overhead costs by $45,000. Calculate Nunez's operating income if it closes the Rhode Island store. Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. Begin by calculating Nunez's operating income if it closes the Rhode Island store. (Enter losses in revenues as a negative amount. Enter a "0" if the cost is Data Table (Loss in Revenues) Savings in Costs Revenues Connecticut Store Rhode Island Store Operating costs $ 1,100,000 $ 840,000 Revenues Cost of goods sold Operating costs Lease rent (renewable each year) Cost of goods sold 780,000 640,000 Labor costs (paid on an hourly basis) Lease rent (renewable each year) 89,000 78,000 Depreciation of equipment Labor costs (paid on an hourly basis) 50,000 38,000 Utilities (electricity, heating) Depreciation of equipment 23,000 22,000 Corporate overhead Utilities (electricity, heating) 43,000 50,000 Total operating costs 50,000 38,000 Allocated corporate overhead Effect on operating income (loss) 1,035,000 866,000 Total operating costs Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. 2$ 65,000 $ (26,000) Operating income (loss) Lopez is that Nunez Corporation's operating income would increase if it closes down the Rhode Island store as shown by the analysis above. Print Done Entor c ny punmber in the od+ fiolde ond then oontinue to the noxt auestion
Transcribed Image Text:Nunez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2014 is as follows: (Click to view the operating income for the stores.) The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the management accountant at Nunez Corporation, makes the following comment, "Nunez can increase its profitability by closing down the Rhode Island store." Is Maria Lopez Correct? Read the requirements. Requirement 1. By closing down the Rhode Island store, Nunez can reduce overall corporate overhead costs by $45,000. Calculate Nunez's operating income if it closes the Rhode Island store. Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. Begin by calculating Nunez's operating income if it closes the Rhode Island store. (Enter losses in revenues as a negative amount. Enter a "0" if the cost is Data Table (Loss in Revenues) Savings in Costs Revenues Connecticut Store Rhode Island Store Operating costs $ 1,100,000 $ 840,000 Revenues Cost of goods sold Operating costs Lease rent (renewable each year) Cost of goods sold 780,000 640,000 Labor costs (paid on an hourly basis) Lease rent (renewable each year) 89,000 78,000 Depreciation of equipment Labor costs (paid on an hourly basis) 50,000 38,000 Utilities (electricity, heating) Depreciation of equipment 23,000 22,000 Corporate overhead Utilities (electricity, heating) 43,000 50,000 Total operating costs 50,000 38,000 Allocated corporate overhead Effect on operating income (loss) 1,035,000 866,000 Total operating costs Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. 2$ 65,000 $ (26,000) Operating income (loss) Lopez is that Nunez Corporation's operating income would increase if it closes down the Rhode Island store as shown by the analysis above. Print Done Entor c ny punmber in the od+ fiolde ond then oontinue to the noxt auestion
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