Question

Please help me answer the following two questions

Footwear Stores Ltd operates three stores in Malaysia area. A segmented profit statement for the company for the last quarter is given below: Footwear Stores Ltd Profit statement for the quarter ended 30th June 2017 Particulars Total Amount East Store Central Store ($) Amount ($) Amount ($) Sales 4,000,000 800,000 2,000,000 Cost of goods sold 2,144,000 416,000 1,080,000 Gross margin 1,856,000 384,000 920,000 Operating expenses: Selling expenses 1,010,200 280,000 402,000 Administrative expenses 487,600 129,000 209,200 Net operating profit / loss 358,200 (25,000) 308,800 West Store Amount ($) 1,200,000 648,000 552,000 328,200 149,400 74,400 The East store has consistently shown losses over the past two years. For this reason, management is giving consideration to close the store. The company has retained you to make a recommendation as to whether the store should be closed or kept open. The following additional information is available for your use. (a) The breakdown of the selling and administrative expenses is as follows: Breakdown of selling expenses Particulars Total Amount East Store Central Store ($) Amount ($) Amount ($) Sales salaries 304,000 89,000 115,000 Direct advertising 241,000 65,000 96,000 General advertising* 60,000 12,000 30,000 Store rent 345,000 95,000 140,000 Depreciation of store 21,200 6,000 8,000 fixtures Delivery salaries 27,000 9,000 9,000 Depreciation of delivery 12,000 4,000 4,000 equipment Total selling expenses 1,010,200 280,000 402,000 * Allocated on the basis of sales West Store Amount ($) 100,000 80,000 18,000 110,000 7,200 9,000 4,000 328,200 Question 1 continued on page 2 Page 1 of 2

Answer 1

Total 2500 58100 Central 140860 29700 West |10000 23400 5000 21202 (Sino +3.000) 1250 10260 (1200+306) 1250 Solution 1 If ast store is closed & space can't be sub leased Breakdown of Selling expenses and administration expenses Particulars East A Store Rent 8) Employeement tax (74100-1600) (21200 - Gun) c) Depireciation of facture D) Insurance of fixture 2500 (Theof com) E) Insurance of inventory slosco 5) Stove management (salarydom G) Depreciation of delivery, equipment 1) Gerezal baffic salary de_othes "expenses in sales ratio ( 70 ord+Yurre -Sim) I) Utilities 7 Sales Salaries k) Direct Advertising 1) General Advertising in sales ratio (2012) m) Delivery Salary 11,5 7,300 200 lo 500 100 ISOUD 39000 1200 1520n bon 95000 D boos 570 WA 500 42000 1150 215000 ) 176on Goooo Todo Soom 9600D 37500 18oro 9000 Total expenses 6,39,950 4,97,350

this is further elaboration to this answer..

gross margin will When 1/5th of total sales of East Store [getting Closed] gets transferred to West Store the come down by 32000 3200 & for transfer of 17th Sale. West Store has to reduce the cost incurred to some extent so that it can reach margin level to 48% unlike East Store, Some of these cost can be every controlled by : 1) Reduction in Raw Material plice Reduction in labour cost m) Automation in basic operations to save energy Raw material in lots to claim Auge discount, im Ruchasing Raw material This is just + an indicative list there can be number of reasons be numerous of secarons which can be beneficial.

PLEASE LIKE THE ANSWER IF YOU FIND IT HELPFUL OR YOU CAN COMMENT IF YOU NEED CLARITY / EXPLANATION ON ANY POINT.