Shown below is a segmented income statement for Drexel-Hall during the current month:

All stores are similar in size, carry similar products, and operate in similar neighborhoods. Store 1 was established first and was built at a lower cost than were Stores 2 and 3. This lower cost results in less depreciation expense for Store 1.Store 2 follows a policy of minimizing both costs and sales prices. Store 3 follows a policy of providing extensive customer service and charges slightly higher prices than the Other two stores.

Top management Of Drexel-Hall is considering closing Store 3. The three stores are close enough together that management estimates closing Store 3 would cause sales at Store 1 to increase by $60,000, and sales at Store 2 to increase by $120,000. Closing Store 3 is not expected to cause any change in common fixed costs.

Compute the increase or decrease that closing Store 3 should cause in:

a. Total monthly sales for Drexel-Hall stores. b. The monthly responsibility margin Of Stores 1 and 2. c. The company's monthly income from operations.

Sales. Variable costs Contribution margin Drexel-Hall Dollars $1,800,000 % $ 720,000 Profit Centers Store 1 Dollars % Store 2 Dollars % Store 3 Dollars % 100% $600,000 100% $600,000 100% $600,000 100% 1,080,000 60 372,000 62 378,000 63 330,000 55 40% $228,000 38% $222,000 37% $270,000 45% Traceable fixed costs: controllable Performance margin Traceable fixed costs: committed Store responsibility margin Common fixed costs Income from operations 432,000 24 120,000 20 102,000 17 210,000 35 $ 288,000 16% $108,000 18% $120,000 20% $60,000 10% 180,000 10 48,000 $ 108,000 6% $ 60,000 36,000 2 $ 72,000 4% 8 66,000 11 66,000 11 10% $ 54,000 9% $ (6,000) (1)%