TI11-4 (similar to) Question Help Orion Corporation ns two stores, one in Medfie

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TI11-4 (similar to) Question Help Orion Corporation ns two stores, one in Medfield and one in Oakland Operating income for each store in 2017as follows: (Click the icon to view the operating income.) The equipment has zero disposal value Read the requirements Requirement1. By closing down the Oakland store, Orion can reduce overall corporate overhead costs by 588,000. Should Orion Coation close down the Oakland store? (Complste all answer boxes. Enter losses in revenues as a negative amount Enter a "0" il the cost is nol relevant. If the nel effect is an operating loss enter the amount with parentheses or a minus sign) (Loss in Revenues) Savings in Costs from Closing Oakland Store Data Table Medfield Store Oakland Store 2.550,000 1,650,000 Revenues Operating costs Operating costs Cast of goods sold Varlable operating costs (labor, utilitles) Lease rent (renewable each year) Depreciation of equipment Allocate Cost of goads sald Variable aperating costs (labor, utities Lease rent (renewable each year) Depreclation of equipment Allocated 1,300,000 170,000 138,000 46,000 84,000 1,738,000 1,280,000 125,000 162,000 40,500 79,000 1,686,500 (36,500) d corporate overhead corporate overhead Total operating costs Total operating costs Effect on operating income (loss) 812,000 $ Operating income (loss) Print Done Requirements 1. By closing down the Oakland store, Orion can reduce overall corporate overhead costs by $88,000. Should Orion Corporation close down the Oakland store? 2. Instead of closing down the Oakland store, Orion Corporation is thinking of opening anather store with revenues and costs identical to the Oakland slore including a cost of $50,000 to acquire equipment with a one-year useful life and zero disposal value). Opening this store will increase corporate overhead costs by $14,000. Oakland store? Explain. Should Orion Corporatio n open another store like the PrintDone

Explanation / Answer

Close the Oakland Store Oakland store Revenue -1650000 Operating cost Cost of Good sold 1280000 Variable operating cost 125000 Lease rent 162000 Depreciation on Equuipment 0 Allocated Corporate overhead 88000 Total operating cost 1655000 Operating Income 5000 Yes it should close the Oakland Store as there is overall incraese in the profit of the entity by $5000 cross check working Medlife store Revenue $2,550,000 Operating cost Cost of Good sold 1300000 Variable operating cost 170000 Lease rent 138000 Depreciation on Equuipment 86500 Allocated Corporate overhead (84000+79000-88000) 75000 Total operating cost 1769500 Operating Income $780,500 ans 2 Medlife store Oakland store New Store All store Revenue $2,550,000 1650000 1650000 $5,850,000 Operating cost Cost of Good sold 1300000 1280000 1280000 $3,860,000 Variable operating cost 170000 125000 125000 $420,000 Lease rent 138000 162000 162000 $462,000 Depreciation on Equuipment 46000 40500 40500 $127,000 Allocated Corporate overhead 84000 79000 14000 $177,000 Total operating cost 1738000 1686500 1621500 $5,046,000 Operating Income $812,000 -36500 $28,500 $804,000 Yes it should open the new store as theres is increase in income

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