Problem:
Annie B's Homemade Ice Cream is an ice cream shop in Asheville, NC. Annie's Homemade is deciding whether to retain or drop a 700-square feet satellite shop location. The company makes the ice cream sold at the satellite location at its larger main shop location. Twice a month the company transports ice cream from its main shop to the satellite location. The company gathered the following additional information to assist in making the decision: Annual sales at the satellite location $ 130,000 Ingredient costs as a percent of sales 30% Monthly rent at satellite location (the lease is cancelable) $ 2,200 Average monthly utility expense at satellite location $ 200 Part-time store managers' combined annual wages at satellite location $ 36,000 Annual hourly wages paid to additional employees at satellite location $ 32,000 Annual hours spent by salaried managers at the main shop location supporting the satellite location 600 Other annual expenses: Annual depreciation expense on satellite store's equipment (no salvage value) $ 5,000 Annual pickup truck and cargo trailer depreciation, insurance, registration, and vehicle tax $ 16,000 Annual manufacturing overhead at main shop location (e.g., equipment depreciation, rent, utilities, insurance, etc.) $ 55,000 The salaried managers working at the