The boot department at the omaha department store is being considered for closure. the following information relates to boot activity: sales revenue $ 350,000 variable costs: cost of goods sold 280,000 sales commissions 30,000 fixed operating costs 90,000 if 70% of the fixed operating costs are avoidable, should the boot department be closed?

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=

∴ Net profit/loss=

⇒ Net profit/loss=

∴ Net loss=

∴ Yes boot department should be closed, as Omaha department store is better off by $23000.

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