Asked by Alberto Perez on May 05, 2024
Verified
The most recent monthly income statement for Benner Stores is given below:
Due to its poor showing, consideration is being given to closing Store B. Studies show that if Store B is closed, one-fourth of its traceable fixed expenses will continue unchanged. The studies also show that closing Store B would result in a 10 percent decrease in sales in Store A. The company allocates common fixed expenses to the stores on the basis of sales dollars.
Required:
Determine the monthly financial advantage (disadvantage) of closing Store B.
Traceable Fixed Expenses
Fixed costs that can be directly linked to a specific product, department, or segment of a company, making it easier to allocate expenses accurately.
Common Fixed Expenses
Expenses shared across different departments or product lines within a company that do not change with production or sales volume.
Sales Dollars
A measurement of revenue generated from sales activities, expressed in the currency of dollars.
- Analyze the pecuniary repercussions of terminating a product or segment by evaluating related costs and rewards.
Verified Answer
KR
Learning Objectives
- Analyze the pecuniary repercussions of terminating a product or segment by evaluating related costs and rewards.