Question

A company has stores in different countries. The CEO is not sure about the profitability of three stores. The following table includes the revenues and costs of these three stores in the year ended (in euros) :

€	Paris	Vienna	Dublin
Sales revenue	300 000	500 000	750 000
Cost of sales	225 000	380 000	620 000
Store fixed costs	40 300	68 300	135 000
Allocated head office costs	36 000	45 000	50 000

Should any of the stores be closed as soon as possible? Choose the appropriate decision for each store on the assumption that closing one store will not affect any other stores and total head office costs would not decrease if any of the stores were closed.

1) Paris

close or continue

2) Vienna

close or continue

3) Dublin

close or continue

Answer 1

					(in Euros)
		Paris	Vienna	Dublin	Total Net Income/ (Loss) of Company
Sales Revenue		3,00,000	5,00,000	7,50,000
Cost of Sales		2,25,000	3,80,000	6,20,000
Store fixed costs		40,300	68,300	1,35,000
Allocated head office costs		36,000	45,000	50,000
Net Income		-1,300	6,700	-55,000	-49,600
1. If Store in Paris closes
		Paris	Vienna	Dublin
Sales Revenue		-	5,00,000	7,50,000
Cost of Sales		-	3,80,000	6,20,000
Store fixed costs		-	68,300	1,35,000
Allocated head office costs		36,000	45,000	50,000
Net Income		-36,000	6,700	-55,000	-84,300
2. If Store in Vienna closes
		Paris	Vienna	Dublin
Sales Revenue		3,00,000	-	7,50,000
Cost of Sales		2,25,000	-	6,20,000
Store fixed costs		40,300	-	1,35,000
Allocated head office costs		36,000	45,000	50,000
Net Income		-1,300	-45,000	-55,000	-1,01,300
3. If Store in Dublin closes
		Paris	Vienna	Dublin
Sales Revenue		3,00,000	5,00,000	-
Cost of Sales		2,25,000	3,80,000	-
Store fixed costs		40,300	68,300	-
Allocated head office costs		36,000	45,000	50,000
Net Income		-1,300	6,700	-50,000	-44,600
As the Loss is lowest in closing the store at Dublin and continuing stores at Paris and Vienna