Final answer:
The manager of an investment center has the authority to open new stores or close existing ones. Investment center managers control over capital investments, unlike cost, profit, and revenue centers. The decision to continue business depends on revenue covering variable costs in the short run, and overall viability in the long run. Option C)
Step-by-step explanation:
The manager with the authority to open new stores or close existing ones is typically found in an investment center. Investment centers have control over their revenue, their expenses, and also make decisions regarding the capital investments of their operations, which includes opening and closing stores. Unlike cost centers, profit centers, and revenue centers where the managerial focus is limited to costs, profits, and revenue generation without direct authority over investment decisions, managers of investment centers usually have a broad range of control that impacts the business entity's assets, liabilities, and equity.
In the scenarios provided, the decision to continue or cease the business operations of a Yoga Center is discussed. The scenarios illustrate short-run decisions based on covering variable costs. It is highlighted that if a center's revenue does not exceed the variable costs, such as in scenarios 1 and 2 where the center earns revenues of $0 and $10,000 while having variable costs of $15,000, respectively, it should cease operations to avoid increasing losses. However, scenario 3, where revenue is $20,000 against the same variable costs, suggests that the Yoga Center can cover its variable costs and the losses are diminished, indicating it should stay operational in the short run. Moreover, in all cases, a long-term strategy is suggested that if revenues do not improve before the expiration of the rental contract, the firm should exit the business.