Sanchez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2017 is as follows: Connecticut Store Rhode Island Store Revenues $1,070,000 $ 860,000 Operating costs Cost of goods sold 750,000 660,000 Lease rent (renewable each year) Labor costs (paid on an hourly basis) 90,000 42,000 75,000 42,000 Depreciation of equipment 25,000 22,000 Utilities (electricity, heating) 43,000 46,000 40,000 Allocated corporate overhead Total operating costs 50,000 1,000,000 $ 70,000 885,000 Operating income (loss) S (25,000) The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the management accountant at Sanchez Corporation, makes the following comment, "Sanchez can increase its profitability by closing down the Rhode Island store or by adding another store like it."
Sanchez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2017 is as follows: Connecticut Store Rhode Island Store Revenues $1,070,000 $ 860,000 Operating costs Cost of goods sold 750,000 660,000 Lease rent (renewable each year) Labor costs (paid on an hourly basis) 90,000 42,000 75,000 42,000 Depreciation of equipment 25,000 22,000 Utilities (electricity, heating) 43,000 46,000 40,000 Allocated corporate overhead Total operating costs 50,000 1,000,000 $ 70,000 885,000 Operating income (loss) S (25,000) The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the management accountant at Sanchez Corporation, makes the following comment, "Sanchez can increase its profitability by closing down the Rhode Island store or by adding another store like it."
Chapter5: Introduction To Business Expenses
Section: Chapter Questions
Problem 63P
Related questions
Question
Calculate Sanchez’s operating income if it keeps the Rhode Island store open and opens another store with revenues and costs identical to the Rhode Island store (including a cost of $22,000 to acquire equipment with a one-year useful life and zero disposal value). Opening this store will increase corporate
Transcribed Image Text:Sanchez Corporation runs two convenience stores, one in
Connecticut and one in Rhode Island. Operating income for each store in 2017 is as follows:
Connecticut Store Rhode Island Store
Revenues
$1,070,000
$ 860,000
Operating costs
Cost of goods sold
750,000
660,000
Lease rent (renewable each year)
Labor costs (paid on an hourly basis)
90,000
42,000
75,000
42,000
Depreciation of equipment
25,000
22,000
Utilities (electricity, heating)
43,000
46,000
40,000
Allocated corporate overhead
Total operating costs
50,000
1,000,000
$ 70,000
885,000
Operating income (loss)
S (25,000)
The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the management
accountant at Sanchez Corporation, makes the following comment, "Sanchez can increase its profitability
by closing down the Rhode Island store or by adding another store like it."
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College