Bannock Safety Equipment Ltd. operates two stores, one in Edmonton and another in Thunderbay. The following income statements were prepared for the most recent year:
The store equipment and leasehold improvements have no market value. The building leases can be cancelled without penalty.
Required:
a. Calculate the dollar value of sales required for each store to break-even assuming that all of the fixed costs are to be covered?
b. Should management close the Thunderbay store? Assume that corporate overhead would be reduced by $100,000 if the Thunderbay store is closed.

Question

Bannock Safety Equipment Ltd. operates two stores, one in Edmonton and another in Thunderbay. The following income statements were prepared for the most recent year:
  The store equipment and leasehold improvements have no market value. The building leases can be cancelled without penalty.
Required:
a. Calculate the dollar value of sales required for each store to break-even assuming that all of the fixed costs are to be covered?
b. Should management close the Thunderbay store? Assume that corporate overhead would be reduced by $100,000 if the Thunderbay store is closed.

Quizplus · Accepted Answer

The Answer of Bannock Safety Equipment Ltd. operates two stores, one in Edmonton and another in Thunderbay. The following income statements were prepared for the most recent year:
  The store equipment and leasehold improvements have no market value. The building leases can be cancelled without penalty.
Required:
a. Calculate the dollar value of sales required for each store to break-even assuming that all of the fixed costs are to be covered?
b. Should management close the Thunderbay store? Assume that corporate overhead would be reduced by $100,000 if the Thunderbay store is closed.