The $12 in Fixed costs for Bampton include $4n corporate costs- these costs can not be avoided if this location is closed. The rest of the fixed costs can be avoided if this location is closed, including $3 in depreciation for equipment - the equipment has no disposal value, and will result on a loss on disposal of $2 when disposed. Eastern is considering closing its Bampton store. If Bampton is closed, the following will likely occur: i. Sales at Ansonville will increase by 10% ii. Ansonville will have to rent more space - this will increase rent from $3 to $4 per year Required: A. Compute net income if Eastern Stores closes the Bampton location. B. What other consideration should be made if closing this store?
The $12 in Fixed costs for Bampton include $4n corporate costs- these costs can not be avoided if this location is closed. The rest of the fixed costs can be avoided if this location is closed, including $3 in depreciation for equipment - the equipment has no disposal value, and will result on a loss on disposal of $2 when disposed. Eastern is considering closing its Bampton store. If Bampton is closed, the following will likely occur: i. Sales at Ansonville will increase by 10% ii. Ansonville will have to rent more space - this will increase rent from $3 to $4 per year Required: A. Compute net income if Eastern Stores closes the Bampton location. B. What other consideration should be made if closing this store?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Eastern Clothing has two locations. The most recent income statement is as follows:
Ansonville Bampton
(in Smillions)
Sales
Variable Costs
Total
40
10
50
22
25
Contribution Margin
18
7
25
Fixed Costs
12
12
24
Operating Income
6
(5)
1
The $12 in Fixed costs for Bampton include $4n corporate costs - these costs can not be avoided if this location is
closed. The rest of the fixed costs can be avoided if this location is closed, including $3 in depreciation for
equipment - the equipment has no disposal value, and will result on a loss on disposal of $2 when disposed.
Eastern is considering closing its Bampton store. If Bampton is closed, the following will likely occur:
i.
Sales at Ansonville will increase by 10%
ii.
Ansonville will have to rent more space - this will increase rent from $3 to $4 per year
Required:
A. Compute net income if Eastern Stores closes the Bampton location.
B. What other consideration should be made if closing this store?
D. Focus
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