Perez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2020 is as follows: (Click to view the operating income for the stores.) Requirement 1. By closing down the Rhode Island store, Perez can reduce overall corporate overhead costs by $43,000. Calculate Perez'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 Perez's operating income if it closes the Rhode Island store. (Complete all input fields. 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.) Revenues Operating costs Cost of goods sold i (Click the icon to view the add-or-drop segments information.) Read the requirements. Lease rent (renewable each year) Labor costs (paid on an hourly basis) Depreciation of equipment Utilities (electricity, heating) Corporate overhead (Loss in Revenues) Savings in Costs Requirements - 1. By closing down the Rhode Island store, Perez can reduce overall corporate overhead costs by $43,000. Calculate Perez'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 Perez'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 $20,000 to acquire equipment with a 1-year useful life and zero disposal value). Opening this store will increase corporate overhead costs by $4,000. Is Maria Lopez's statement about the effect of adding another store like the Rhode Island store correct? Explain. X
Perez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2020 is as follows: (Click to view the operating income for the stores.) Requirement 1. By closing down the Rhode Island store, Perez can reduce overall corporate overhead costs by $43,000. Calculate Perez'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 Perez's operating income if it closes the Rhode Island store. (Complete all input fields. 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.) Revenues Operating costs Cost of goods sold i (Click the icon to view the add-or-drop segments information.) Read the requirements. Lease rent (renewable each year) Labor costs (paid on an hourly basis) Depreciation of equipment Utilities (electricity, heating) Corporate overhead (Loss in Revenues) Savings in Costs Requirements - 1. By closing down the Rhode Island store, Perez can reduce overall corporate overhead costs by $43,000. Calculate Perez'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 Perez'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 $20,000 to acquire equipment with a 1-year useful life and zero disposal value). Opening this store will increase corporate overhead costs by $4,000. Is Maria Lopez's statement about the effect of adding another store like the Rhode Island store correct? Explain. X
Chapter9: Deduct Ions: Employee And Self-employed - Related Expenses
Section: Chapter Questions
Problem 25P
Related questions
Question
Transcribed Image Text:Perez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating
income for each store in 2020 is as follows:
(Click to view the operating income for the stores.)
Requirement 1. By closing down the Rhode Island store, Perez can reduce overall corporate overhead costs by $43,000. Calculate Perez'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.
Revenues
Operating costs
C
Begin by calculating Perez's operating income if it closes the Rhode Island store. (Complete all input fields. 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.)
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)
i (Click the icon to view the add-or-drop segments information.)
Read the requirements.
(Loss in Revenues)
Savings in Costs
Requirements
1. By closing down the Rhode Island store, Perez can reduce overall corporate overhead costs by
$43,000. Calculate Perez'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 Perez'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 $20,000 to
acquire equipment with a 1-year useful life and zero disposal value). Opening this store will
increase corporate overhead costs by $4,000. Is Maria Lopez's statement about the effect of
adding another store like the Rhode Island store correct? Explain.
Print
-
Done
X
Transcribed Image Text:Data table
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)
Allocated corporate overhead
Total operating costs
Operating income (loss)
Print
$
$
Connecticut Rhode Island
Store
Store
1,090,000 $
750,000
90,000
48,000
28,000
41,000
52,000
1,009,000
Done
81,000 $
860,000
660,000
72,000
47,000
20,000
51,000
38,000
888,000
(28,000)
-
X
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