Reference no: EM131495347

Hagar, Inc. is a retail chain with 125 stores organized into 5 regions. The most recent annual income statement for the Snert, ND store is given below (in $000). It is typical of recent years, and Hagar is considering closing the store because of chronic losses. Should the Snert store be closed? What factors should Hagar consider in making the decision? Be specific and include calculations where appropriate. Sales $2,520 COGS 1,650 Gross margin 870 Expenses: Wages $395 Store management 110 Advertising 180 Regional management 78 Occupancy 83 Depreciation 87 933 Net loss (63) Advertising consists of 60% local ads, and 40% allocation of national advertising costs. Regional management represents an allocation of the cost of operating the regional office. These are fixed costs except for $1,000/year of travel costs to visit the Snert store. Depreciation costs are $60,000 for the building, and $27,000 for equipment and fixtures. If the store is closed, the building could be rented out for $27,000/year. The equipment and fixtures have no value and would be junked. Occupancy costs include $20,000 of taxes and insurance which must be paid on the building as long as it is owned. The remaining occupancy costs,such as maintenance and utilities, would be paid by a tenant if the building is rented.