13.

Western Apparel Company owns two stores and management is considering eliminating the East store due to declining sales. Segmented contribution income statements are as follows and common fixed costs are allocated on the basis of sales.

		West		East		Total
Sales	$500,500		90,000		$590,500
Variable costs	262,500		45,000		307,500
Direct fixed costs	62,500		25,000		87,500
Segment margin	175,500		20,000		195,500
Allocated fixed costs	137,500		35,000		172,500
Net Income	$38,000		($15,000)		$23,000

Western feels that if they eliminate the East store that sales in the West store will decline by 15%. If they close the East store, overall company net income will:

A)

decline by $74,375.

B)

decline by $55,700.

C)

decline by $85,625.

D)

decline by $20,000.