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tween the two, this offer is better as it augments profit by $2,40,000 in a year (320,000 12 months), vis-avis, $40,000 one time increase in earlier offer. P.23.7 Baluja Shoes Ltd which has a chain of shoe shops throughout the country has two shops in Madras of which Shop I makes a profit and Shop II makes a loss. The following is the summarised profit and loss account of shop II for the current month ended March 31: Sales 36,00,000 Cost of sales 4,92,000 Gross profit 1,08,000 (Contd.) j78 Expenses: Commission to salesmen 26,000 Manager's salary 12,000 Head office expenses 10,500 Motor van expenses: Fixed (allocated) 6,900 Variable (allocated) 2,400 Other items (like rent, insurance, salesmen's salaries) 1,09,950 1,47750 Loss for the year (39,750) The commission to salesmen is a fixed percentage on turnover. There is a common manager for the two shops and his salary is equally shared by the two shops. The motor van is also common to the two shops. Its fixed expenses are shared equally by the two shops but the running expenses are apportioned on the basis of the turnover. Prepare a report explaining the financial implication of the closing down Shop II, assuming that 20 per cent of its turnover will be gained by Shop I without that shop needing any additional staff

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