Sanchez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2014 is as follows: (Click to view the operating income for the stores.) 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." Is Maria Lopez Correct? Read the requirements. (...) Requirement 1. By closing down the Rhode Island store, Sanchez can reduce overall corporate overhead costs by $51,000. Calculate Sanchez's operating income if it closes the Rhode Island store. Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. Begin by calculating Sanchez's operating income if it closes the Rhode Island store. (Enter losses in revenues as a negative amount. Enter a "0" if the cost is not relevant. If the net effect is an operating loss enter the amount with parentheses or a minus sign.) (Loss in Revenues) Savings in Costs Revenues Operating costs Cost of goods sold Lease rent (renewable each year) Labor costs (paid on an hourly basis) Depreciation of equipment Utilities (electricity, heating) Corporate overhead Total operating costs Effect on operating income (loss) Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. Lopez is ▼that Sanchez Corporation's operating income would increase if it closes down the Rhode Island store as shown by the analysis above. Sanchez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2014 is as follows: (Click to view the operating income for the stores.) 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 ind Read the requirements. - X Data table spurainy Lusi Cost of goods sold Requirement 1. By closing 775,000 89,000 680,000 74,000 te Sanchez's operating income if it closes the Rhode Island sto Lease rent (renewable each year) Labor costs (paid on an hourly basis) Begin by calculating Sanche relevant. If the net effect is Enter a "0" if the cost is not 46,000 43,000 Depreciation of equipment 22,000 19,000 Utilities (electricity, heating) 47,000 44,000 49,000 44,000 Allocated corporate overhead Revenues Operating costs 1,028,000 904,000 Total operating costs (94,000) Operating income (loss) Print Done Requirements 1. By closing down the Rhode Island store, Sanchez can reduce overall corporate overhead costs by $51,000. Calculate Sanchez's operating income if it closes the Rhode Island store. Is Maria Lopez's statement about the effect of closing the Rhode Island store correct? Explain. 2. 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 $19,000 to acquire equipment with a one-year useful life and zero disposal value). Opening this store will increase corporate overhead costs by $8,000. Is Maria Lopez's statement about the effect of adding another store like the Rhode Island store correct? Explain. Cost of goods sold Lease rent (renewable e Labor costs (paid on an Depreciation of equipme Utilities (electricity, heati Corporate overh Total operating Effect on operating Is Maria Lopez's stat Lopez is $ 92,000 $ X nalysis above.
