EBK HORNGREN'S COST ACCOUNTING
16th Edition
ISBN: 9780134475998
Author: Rajan
Publisher: YUZU
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Textbook Question
Chapter 11, Problem 11.30E
Closing and opening stores. 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) | 90,000 | 75,000 |
Labor costs (paid on an hourly basis) | 42,000 | 42,000 |
|
25,000 | 22,000 |
Utilities (electricity, heating) | 43,000 | 46,000 |
Allocated corporate |
50,000 | 40,000 |
Total operating costs | 1,000,000 | 885,000 |
Operating income (loss) | $ 70,000 | $ (25,000) |
The equipment has a zero disposal value. In a senior management meeting, Maria Lopez, the
- 1. By closing down the Rhode Island store, Sanchez can reduce overall corporate overhead costs by $44,000. 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.
Required
- 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 $22,000 to acquire equipment with a one-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.
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Martinez Corporation runs two convenience stores, one in Connecticut and one in Rhode Island. Operating income for each
store in 2017 is as follows:
A (Click the icon to view the add-or-drop segments information.)
(Click to view the operating income for the stores.)
Read the requirements
.
Requirement 1. By closing down the Rhode Island store, Martinez can reduce overall corporate overhead costs by S41,000. Calculate Martinez'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.
- X
Begin by calculating Martinez's operating income if it closes the Rhode Island store. (Complete all ans
parentheses or a minus sign.)
let effect is an operating loss enter the amount with
Data table
(Loss in Revenues)
Savings in Costs
Connecticut
Rhode Island
Store
Store
Revenues
Revenues
1,040,000 $
820,000
Operating costs
Operating costs
Cost of goods sold
Cost of goods sold
760,000
620,000
Lease rent…
Chapter 11 Solutions
EBK HORNGREN'S COST ACCOUNTING
Ch. 11 - Prob. 11.1QCh. 11 - Define relevant costs. Why are historical costs...Ch. 11 - All future costs are relevant. Do you agree? Why?Ch. 11 - Distinguish between quantitative and qualitative...Ch. 11 - Describe two potential problems that should be...Ch. 11 - Variable costs are always relevant, and fixed...Ch. 11 - A component part should be purchased whenever the...Ch. 11 - Prob. 11.8QCh. 11 - Managers should always buy inventory in quantities...Ch. 11 - Management should always maximize sales of the...
Ch. 11 - Prob. 11.11QCh. 11 - Cost written off as depreciation on equipment...Ch. 11 - Managers will always choose the alternative that...Ch. 11 - Prob. 11.14QCh. 11 - Prob. 11.15QCh. 11 - Qualitative and quantitative factors. Which of the...Ch. 11 - Special order, opportunity cost. Chade Corp. is...Ch. 11 - Prob. 11.18MCQCh. 11 - Keep or drop a business segment. Lees Corp. is...Ch. 11 - Relevant costs. Ace Cleaning Service is...Ch. 11 - Disposal of assets. Answer the following...Ch. 11 - Relevant and irrelevant costs. Answer the...Ch. 11 - Multiple choice. (CPA) Choose the best answer. 1....Ch. 11 - Special order, activity-based costing. (CMA,...Ch. 11 - Make versus buy, activity-based costing. The...Ch. 11 - Inventory decision, opportunity costs. Best Trim,...Ch. 11 - Relevant costs, contribution margin, product...Ch. 11 - Selection of most profitable product. Body Image,...Ch. 11 - Theory of constraints, throughput margin, relevant...Ch. 11 - Closing and opening stores. Sanchez Corporation...Ch. 11 - Prob. 11.31ECh. 11 - Relevance of equipment costs. Janets Bakery is...Ch. 11 - Equipment upgrade versus replacement. (A. Spero,...Ch. 11 - Special order, short-run pricing. Diamond...Ch. 11 - Short-run pricing, capacity constraints. Fashion...Ch. 11 - International outsourcing. Riverside Clippers Corp...Ch. 11 - Relevant costs, opportunity costs. Gavin Martin,...Ch. 11 - Opportunity costs and relevant costs. Jason Wu...Ch. 11 - Opportunity costs. (H. Schaefer, adapted) The Wild...Ch. 11 - Make or buy, unknown level of volume. (A....Ch. 11 - Make versus buy, activity-based costing,...Ch. 11 - Prob. 11.42PCh. 11 - Product mix, special order. (N. Melumad, adapted)...Ch. 11 - Theory of constraints, throughput margin, and...Ch. 11 - Theory of constraints, contribution margin,...Ch. 11 - Closing down divisions. Ainsley Corporation has...Ch. 11 - Dropping a product line, selling more tours....Ch. 11 - Prob. 11.48PCh. 11 - Dropping a customer, activity-based costing,...Ch. 11 - Equipment replacement decisions and performance...
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