Purchase Solution

Jackie's retail business

Not what you're looking for?

Ask Custom Question

Jackie's is a large, locally-owned general retail business operating out of a single location. A condensed version of their most recent annual segmented income statement is given below (all amounts in thousands of dollars).

Company Dept A Dept B Depts C-F
Sales $3,450 $ 345 $690 $2,415
COGS 1,538 179 345 1,014
Gross Margin 1,912 166 345 1,401
Sales Salaries 737 88 153 496
Dept Manager 236 35 48 153
Advertising 50 5 10 35
Occupancy 120 14 16 90
General & Admin. 290 29 58 203
Net Income $ 479 $ (5) $ 60 $ 424

Because Department A has been running a loss for several years, the store manager is thinking of eliminating the department. She believes that there is limited additional demand for the products carried in adjacent Department B. If A were closed, B would expand into half of its floor space, with the rest being walled off and left vacant. Sales of Department B would be expected to increase 30%, with the same sales mix. A 20% increase in sales staff in this department would be necessary; these positions could be filled by existing staff from A, with the rest being laid off. Because Department A currently attracts some customers to the store, it is expected that sales of Departments C-F would decline 3%. Occupancy costs include such costs as property taxes, insurance, and utilities, and are allocated on the basis of square footage. The proposal to leave some space vacant would save $2,000/year in utility costs. All advertising is general for the entire store, and the cost is allocated to departments based on sales. General and administrative costs include general store management and support personnel, and are also allocated based on sales.

Advise the store manager as to her plan to close Department A. Include any necessary calculations.

Purchase this Solution

Solution Summary

The solution discusses Jackie's Retail Business.

Purchase this Solution


Free BrainMass Quizzes
Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Operations Management

This quiz tests a student's knowledge about Operations Management

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.