Prepare analysis defending closing store or keeping open

Assignment Help Accounting Basics

Reference no: EM131910096

Problem

The manager of the Nebraska division of Super Stores, Inc. is concerned about the performance of the North Platte store, which has been running losses for several years. His boss, the president of Midwest Region, thinks that the store should be closed. Prepare an analysis, defending either closing the store or keeping it open.

Income Statement (in $000)

	Division	Kearney	Grand Island	Norfolk	North Platte
Sales	6,995	1,721	1,719	2,044	1,511
COGS	4,071	991	973	1,202	905
Gross Margin	2,924	730	746	842	606
Payroll	1,351	306	311	409	325
Occupancy	458	108	111	135	104
Advertising	266	66	54	75	71
Administrative	608	152	152	152	152
Total Expense	2,683	632	628	771	652
Net Income	241	98	118	71	-46

Notes:

1) $120,000 of advertising cost relates to the entire division, and is allocated equally to each store. The remainder is store-specific local advertising.

2) Administrative costs consist of $200,000 of divisional overhead and $408,000 of general corporate overhead allocated to the division.
These costs are allocated equally to each store.

3) All payroll and occupancy costs relate solely to each local store.

4) About 60% of occupancy cost for each store is rent expense under leases running 4 to 8 years, with the remainder being utilities and maintenance.

Reference no: EM131910096

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