If the uptown store is closed. what is the amount of, Ask an Expert

Accounting

A company currently operates two stores, Uptown and Midtown:

Last year's results Uptown Midtown
Sales revenues $300,000 $400,000
Variable costs (120,000) (140,000)
Contribution margin $180,000 $260,000
Store related fixed costs (100,000) (100,000)
Allocated common fixed costs (90,000) (120,000)
Operating income (loss) ($10,000) $40,000

The company is considering closing the Uptown store because of its sustained operating losses during the last two years. It is estimated that all of store related and 20% of common fixed costs allocated to Uptown can be avoided if the Uptown store is closed. What is the amount of avoidable costs if the Uptown store is closed?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M985182

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