Reference no: EM132617200

The manager of one of Cotton On Group's flagship stores is considering a reconfiguration their store's layout. This would involve eliminating the store's Rubi department and increasing the space allocated to the Cotton On Kids department.

The net result for the store's Rubi and Cotton On Kids departments for the past 12 months is provided below:

                                                                           Rubi                        Cotton On Kids

sales revenue                                                           $190,000               $420,000

Cost of sales                                                            -$95,000             -$168,000

Allocated staffing costs                                               -$45,000             -$90,000

Allocated store rent and other facilities cost                     -$70,000            -$140,000

Net result                                                                    -$20,000             $22,000

If the Rubi department is eliminated and the Cotton On Kids department is expanded, it is expected that the revenue from the Cotton On Kid's department will grow by 45% If this change goes ahead, the store manager has estimated that it will cost $12,000 to reconfigure the store.

Required:

Problem 1: Evaluate whether this proposal is acceptable on financial grounds. Ensure that your answer is discussed and supported by relevant calculations/workings

Problem 2: Identify and discuss two relevant qualitative factors that should be considered in the evaluation of this proposal