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North Store Closure Financial Analysis

The document analyzes the costs and profits of keeping a North Store open versus closing it. If the North Store is closed, the company would lose $422,400 in gross margin but would avoid $384,740 in costs. While closing the store would result in a $376,600 decrease in company profits initially, if the East Store's gross margin of $105,600 is included, the net operating loss would be $316,800. Since the avoidable costs of $384,740 are greater than the net operating loss, closing the North Store would provide a net advantage of $67,940. Therefore, the conclusion is that the North Store should be closed.

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Aarti J
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33 views1 page

North Store Closure Financial Analysis

The document analyzes the costs and profits of keeping a North Store open versus closing it. If the North Store is closed, the company would lose $422,400 in gross margin but would avoid $384,740 in costs. While closing the store would result in a $376,600 decrease in company profits initially, if the East Store's gross margin of $105,600 is included, the net operating loss would be $316,800. Since the avoidable costs of $384,740 are greater than the net operating loss, closing the North Store would provide a net advantage of $67,940. Therefore, the conclusion is that the North Store should be closed.

Uploaded by

Aarti J
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

a)Gross margin lost if the store is closed -422400

Costs that can be avoided:


Sales salaries 94000
Direct advertising 63000
Store rent 97000
Delivery salaries 16000
Store management salaries 13800
Salary of new manager 18200
General office compensation 9600
Insurance on inventories 7400
Utilities 43000
Employment taxes 22740
Total costs that can be avoided 384740
Decrease in company profits if the North Store is -37660

b)The North Store should not be closed

c)Gross margin lost if the North sto -422400


Gross margin gained from the Eas 105600
Net operating (loss) in gross mar -316800
Less costs that can be avoided if 384740
Net advantage of closing the No 67940

North store should be closed

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