analytics-for-managerial-decision-making

Each department is evaluated for profitability based

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Unformatted text preview: ying 80,000 square feet of space in a rented retail center. Each department is evaluated for profitability based on the following information: Download free ebooks at bookboon.com 16 Business Decision Logic Analytics for Managerial Decision Making Fishing Hunting Camping $ 6,000,000 3,600,000 $ 2,400,000 $ 8,000,000 4,800,000 $ 3,200,000 $ 4,000,000 2,400,000 $ 1,600,000 $ 3,000,000 1,800,000 $ 1,200,000 $21,000,000 12,600,000 $ 8,400,000 $ $ $ $ $ 2,100,000 4,200,000 1,000,000 160,000 185,000 $ 7,645,000 $ 755,000 600,000 1,200,000 250,000 40,000 50,000 $ 2,140,000 $ 260,000 800,000 1,600,000 250,000 40,000 35,000 $ 2,725,000 $ 475,000 Golf 400,000 800,000 250,000 40,000 60,000 $ 1,550,000 $ 50,000 300,000 600,000 250,000 40,000 40,000 $ 1,230,000 $ (30,000) Total Please click the advert Sales Variable expenses Contribution margin Less fixed costs: General/administrative Selling Rent Utilities Depreciation Total fixed costs Net income (loss) Download free ebooks at bookboon.com 17 Business Decision Logic Analytics for Managerial Decision Making Management is quite concerned about the Golf Department. It has had plenty of time to flourish, but has never turned a profit. Further, no one at Casa de Deportes, including the Golf Department manager, believes this situation is apt to change anytime soon. The accounting department was asked to prepare a report of the overall financial impacts if Golf is discontinued. In preparing the “without golf” report, it was learned that only 70% of the General and Administrative costs would be eliminated, rent and depreciation would continue to be incurred, and utilities would be reduced by only half. The selling costs would be completely eliminated. The unavoidable costs from the golf department are assumed to be shifted equally to the other departments (although other allocation methods could be used, the overall conclusions would not change). The income report “without golf” appears as follows: Fishing Hunting Camping Sales Variable expenses Contribution margin Less fixed costs: General/administrative Selling * Rent Utilities Depreciation Total fixed costs $ 6,000,000 3,600,000 $ 2,400,000 $ 8,000,000 4,800,000 $ 3,200,000 $ 4,000,000 2,400,000 $ 1,600,000 $ $ 630,000 1,200,000 333,334 46,666 63,333 $ 2,273,333 $ 830,000 1,600,000 333,333 46,667 48,333 $ 2,858,333 $ 430,000 800,000 333,333 46,667 73,334 $ 1,683,334 $ Net income (loss) $ $ $ 126,667 341,667 (83,334) Golf Total - $18,000,000 10,800,000 $...
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