contestada

Fran is considering permanently closing down her beauty salon. A consultant advises her that if she stays open for business, she will have operating revenues of $300,000 and operating costs of $280,000. In addition, Fran has paid $40,000 for fixtures that can be resold for $15,000 after she closes the beauty salon. Explain whether Fran should close down the beauty salon.

Respuesta :

Tundexi

Answer:

Operating revenue, R = $300000

Operating Cost, C = $280000

Fixed Cost, F = $40000

Salvage value of fixtures, S = $15000

If it remains open, its value will be = R - C - F + S = 300000 - 280000 - 40000 + 15000 = -$5,000

If the salon closes down, its value will be = S - F = 15000 - 40000 = -$25000 .

Fran should remain open as the value of the salon if remaining open (-$5,000) is more than the value of closing it (-$25,000).

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