Final answer:
Calculating retained earnings for Mecca Copy results in an ending balance of $34,700. Cash balance cannot be computed without additional information. Decisions about business continuation depend on the ability to cover costs and make a profit, with consideration of fixed costs and strategic reasons.
Step-by-step explanation:
The question relates to the preparation of a budgeted balance sheet for Mecca Copy, a photocopying center. Using the provided data, we could complete the balance sheet by calculating the missing figures for cash and retained earnings. Retained earnings at the end of the year can be found by taking the beginning balance of retained earnings ($28,000), adding the net income ($11,500), and subtracting the dividends ($4,800), which gives us a total of $34,700.
However, we cannot determine the ending cash balance without additional information regarding cash inflows and outflows aside from the net income and dividends mentioned. In general, to decide whether the center should continue in business or to shut down, an analysis of the center's profitability and its ability to cover not only variable costs but also its fixed costs is required. Without knowledge about fixed costs and other financial obligations, the decision cannot be accurately made.
When the center earns revenues of $20,000 with variable costs of $15,000, it suggests a positive contribution margin, which may indicate staying in business could be a viable option if the contribution margin covers fixed costs and provides a profit. Conversely, if the center earns revenues of $10,000 with variable costs of $15,000, it is operating at a loss where variable costs are not covered, which may suggest it should consider shutting down unless there are strategic or long-term reasons to continue operating at a loss.