Reference no: EM132718312

Ansonville Bampton. Total

Sales.                           40.           10                 50

Variable Costs                   22             3               25

Contribution Margin.            18            7               25

Fixed Costs                          12           12.              24

Operating Income.                   6             (5).           1

The $12 in Fixed costs for Bampton include $4 in corporate costs - these costs can not be avoided if this location is closed. The rest of the fixed costs can be closed if this location is closed, including $3 in depreciation for equipment - the equipment has no disposal value, and will result on a loss on disposal of $2 when disposed.

Eastern is considering closing its Bampton store. If Bampton is closed, the following will likely occur:

i. Sales at Ansonville will increase by 10%

ii. Ansonville will have to rent more space - this will increase rent from $3 to $4 per year

Required:

Problem A. Compute net income if Eastern Stores closes the Bampton location.

Problem B. What other consideration should be made if closing this store?