Asked by Florence Pochon on May 10, 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 particular segment, product, or department within a business.
Common Fixed Expenses
These are expenses that do not vary with production volume or sales volume, shared across different segments of a business.
- Examine the economic benefits (or drawbacks) associated with ceasing a product, service, or segment.
Verified Answer
PJ
Learning Objectives
- Examine the economic benefits (or drawbacks) associated with ceasing a product, service, or segment.