Mama Louise's Pizza Store No

question 76

Essay

Mama Louise's Pizza store no. 16 has fallen on hard times and is about to be closed. The following figures are available for the period just ended:

All employees except the store manager would be discharged. The manager, who earns $27,000 annually, would be transferred to store no. 19 in a neighboring suburb. Additionally, no. 16's furnishings and equipment are fully depreciated and would be removed and transported to Mama Louise's warehouse at a cost of $2,800.
Required:
A. What is store no. 16's reported loss for the period just ended?
B. Should the store be closed? Why?
C. Would Mama Louise's likely lose all $205,000 of sales revenue if store no. 16 were closed? Explain.

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Definitions:

Percentage Change

A mathematical calculation that describes the relative change between an old value and a new value, expressed as a percentage.

Unit Elastic

A situation in demand or supply where a change in price leads to an equal proportionate change in quantity demanded or supplied.

Approximately Unit Elastic

A situation in economics where the percentage change in quantity demanded is roughly equal to the percentage change in price, indicating an elasticity of demand close to one.

Teenagers

Individuals who are in their teenage years, typically between the ages of 13 and 19.