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Please see attachment for question it is due tonig...

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Please see attachment for question it is due tonight and I'm stuck!!!,Cosmo Inc. operates two retail novelty stores: the Mall Store and the Town Store. Condenses monthly operating income data for Cosmo Inc. for November are presented in the accompanying table. Additional information regarding Cosmo?s operations follows the statement. Total Mall Store Town Store Sales $200,00 $80,000 $120,000 Less variable costs 116,000 32,000 84,000 Contirbution margin 84,000 48,000 36,000 Less direct fixed expenses60,000 20000 40,000 Store segment margin 24,000 28000 ($4,000) Less common fixed expenses 10,000 4000 6,000 Operating income 14,000 24,000 ($10,000) ?One-fourth of each store?s direct fixed expenses would continue through December of next year if either store were closed ?Cosmo allocates common fixed expenses to each store on the basis of sales dollars. ?Management estimates that closing the Town Store would result in a 10 percent decrease in Mal Store sales, while closing the Mall Store would not affect Town Store sales. ?The operating results for November are representative of all months. Required: a.)A decision by Cosmo Inc. to close the Town Store would result in a monthly increase (decrease) in Cosmo?s operating income during next year of how much? b.)Cosmo is considering a promotional campaign at the Town Store that would not affect the Mall Store. Increasing monthly promotional expenses at the Town Store by $5,000 in order to increase Town Store sales by 10 percent would result in a monthly increase (decrease) in Cosmo?s operating income during next year of how much? c.)Half of Town Store?s dollar sales are from items sold at variable cost to attract customers to the store. Cosmo is considering deleting these items, a move that would reduce the Town Store?s direct fixed expenses by 15 percent and result in the loss of 20 percent of Town Store?s remaining sales volume. This change would not affect the Mall Store. A decision to eliminate the items sold at costs would result in a monthly increase (decrease) in Cosmo?s operating income during next year of how much? d.)Make a recommendation to Cosmo?s management regarding the three scenarios above. Not limiting yourself to the three scenarios above, what action should management make regarding the Town Store?,Ok, thanks

 

Paper#7744 | Written in 18-Jul-2015

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