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Homework answers / question archive / Ridley and Scott Mercantile operates two stores, one on Maple Avenue and the other on Fenner Road
Ridley and Scott Mercantile operates two stores, one on Maple Avenue and the other on Fenner Road. Results for the month of May, which is representative of all months, are as follows:
Maple Avenue Store Fenner Road Store Total Sales revenue $00,000 $120,000 $200,000 Variable expenses 32,000 80,000 112,000 Contribution margin 48,000 40,000 08,000 Direct fixed expenses 20,000 35,000 55,000 Common fixed expenses 8,000 12,000 20,000 Total fixed expenses 28,000 47,000 75,000 Operating income $20,000 $17,000) $13,000
The following information pertains to Ridley and Scot.operations.
• Forty percent of each store's direct fixed expenses would continue if either store were closed. • Ridley and Scott allocates common fixed expenses to each store on the basis of sales dollars. • Management estimates that closing the Fenner Road store would result in a15% decrease in the Maple Avenue store's sales, while closing the Maple Avenue store would have no effect on the Fenner Road stores sales.
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Calculate Operating income ?
