Assume that Tipton's wallpaper inventory at the time of the closure decision amounted to $23,700. How would you have treated this additional information in making the decision? How would you have treated this additional informatior in making the decision? This cost is important. The revenue generated from the sale of this inventory is relevant to the closure decision. This cost should be ignored. The inventory cost is sunk. Regardless of whether the department is closed, Tipton will have a wallpaper inventory of $23,700. Should Tipton close its wallpaper operation? Calculate the change in income if Tipton closes its wallpaper operation. Tipton One-Stop Decorating sells paint and paint supplies, carpet, and wallpaper at a single store location in suburban Des Moines. Although the company has been very profitable over the years, management has seen a significant decline in wallpaper sales and earnings. Much of this decline is attributable to the Internet and to companies that advertise deeply discounted prices in magazines and offer customers free shipping and toll-free telephone numbers. Recent figures follow. Tipton is studying whether to drop wallpaper because of the changing market and accompanying loss. If the line is dropped, the following changes are expected to occur: - The vacated space will be remodeled at a cost of $12,400 and will be devoted to an expanded line of high-end carpet. Sales of carpet are expected to increase by $120,000, and the line's overall contribution margin ratio will rise by five percentage points. - Tipton can cut wallpaper's fixed costs by 40 percent. Remaining fixed costs will continue to be incurred. - Customers who purchased wallpaper often bought paint and paint supplies. Sales of paint and paint supplies are expected to fall by 20 percent. - The firm will increase advertising expenditures by $25,000 to promote the expanded carpet line