Answer:
Yes, Omaha department store would be better off by $23000.
Explanation:
Given: Sales revenue= $350000.
Cost of goods sold= $280000.
Sales commission= $30000.
Fixed operating cost= $90000.
Now, computing net profit or (loss)
Net profit/loss= [tex]\textrm{sales revenue - cost of goods sold- sales\ commission - Avoidable fixed\ operating\ costs}[/tex]
∴ Net profit/loss= [tex]350000-280000-30000-(90000\times 70\%)[/tex]
⇒ Net profit/loss= [tex]40000-(63000)= (\$ 23000)[/tex]
∴ Net loss= [tex]\$ 23000[/tex]
∴ Yes boot department should be closed, as Omaha department store is better off by $23000.
