Home Builder Supply, a retailer in the home improvement industry, currently operates seven retail outlets in the Maritimes. Management is contemplating building an eighth retail store across town from its most successful retail outlet. The company already owns the land for this store, which currently has an abandoned warehouse located on it. Last month, the marketing department spent $15,000 on market research to determine the extent of customer demand for the new store. Now Home Builder Supply must decide whether to build and open the new store. Which of the following should be included as part of the incremental earnings for the proposed new store? a. The original purchase price of the land where the store will be located. b. The cost of demolishing the abandoned warehouse and clearing the lot. c. The loss of sales in the existing retail outlet, if customers who previously drove from Dartmouth to Halifax to shop at the existing outlet become customers of the new store instead. d. The $15,000 in market research spent to evaluate customer demand. e. Construction costs for the new store. f. The value of the land if sold. g. Interest expense on the debt borrowed to pay the construction costs. a. Should the original purchase price of the land where the store will be located be included in the incremental earnings for the proposed new retail store? (Select from the drop-down menu.)
Home Builder Supply, a retailer in the home improvement industry, currently operates seven retail outlets in the Maritimes. Management is contemplating building an eighth retail store across town from its most successful retail outlet. The company already owns the land for this store, which currently has an abandoned warehouse located on it. Last month, the marketing department spent $15,000 on market research to determine the extent of customer demand for the new store. Now Home Builder Supply must decide whether to build and open the new store. Which of the following should be included as part of the incremental earnings for the proposed new store? a. The original purchase price of the land where the store will be located. b. The cost of demolishing the abandoned warehouse and clearing the lot. c. The loss of sales in the existing retail outlet, if customers who previously drove from Dartmouth to Halifax to shop at the existing outlet become customers of the new store instead. d. The $15,000 in market research spent to evaluate customer demand. e. Construction costs for the new store. f. The value of the land if sold. g. Interest expense on the debt borrowed to pay the construction costs. a. Should the original purchase price of the land where the store will be located be included in the incremental earnings for the proposed new retail store? (Select from the drop-down menu.)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 17E
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Transcribed Image Text:Home Builder Supply, a retailer in the home improvement industry, currently operates seven retail outlets in the Maritimes. Management is contemplating building an eighth retail store across town from its most successful retail outlet. The company already owns the land for
this store, which currently has an abandoned warehouse located on it. Last month, the marketing department spent $15,000 on market research to determine the extent of customer demand for the new store. Now Home Builder Supply must decide whether to build and open the
new store. Which of the following should be included as part of the incremental earnings for the proposed new store?
a. The original purchase price of the land where the store will be located.
b. The cost of demolishing the abandoned warehouse and clearing the lot.
c. The loss of f sales in the existing retail outlet, if customers who previously drove from Dartmouth to Halifax to shop at the existing outlet become customers of the new store instead.
d. The $15,000 in market research spent to evaluate customer demand.
e. Construction costs for the new store.
f. The value of the land if sold.
g. Interest expense on the debt borrowed to pay the construction costs.
a. Should the original purchase price of the land where the store will be located be included in the incremental earnings for the proposed new retail store? (Select from the drop-down menu.)
▼
Yes, this item should be included.
No, this item should not be included.
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