Sanchez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2017 is as follows: Connecticut Store Rhode Island Store Revenues $1,070,000 $ 860,000 Operating costs Cost of goods sold 750,000 660,000 Lease rent (renewable each year) Labor costs (paid on an hourly basis) 90,000 42,000 75,000 42,000 Depreciation of equipment 25,000 22,000 Utilities (electricity, heating) 43,000 46,000 40,000 Allocated corporate overhead Total operating costs 50,000 1,000,000 $ 70,000 885,000 Operating income (loss) S (25,000) 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 or by adding another store like it."

Sanchez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each store in 2017 is as follows: Connecticut Store Rhode Island Store Revenues $1,070,000 $ 860,000 Operating costs Cost of goods sold 750,000 660,000 Lease rent (renewable each year) Labor costs (paid on an hourly basis) 90,000 42,000 75,000 42,000 Depreciation of equipment 25,000 22,000 Utilities (electricity, heating) 43,000 46,000 40,000 Allocated corporate overhead Total operating costs 50,000 1,000,000 $ 70,000 885,000 Operating income (loss) S (25,000) 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 or by adding another store like it."

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 63P

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