Question
Black Stores is a retailer in America . The most recent monthly income statement for Yellow Stores is given below: Store A Store B Total
Black Stores is a retailer in America . The most recent monthly income statement for Yellow Stores is given below: Store A Store B Total Sales $1,300,000 $800,000 $2,100,000 Less variable expense 882,000 $378,000 1,260,000 Contribution margin $418,000 $422,000 $840,000 Less traceable fixed expense 231,000 189,000 420,000 Segment margin $187,000 $233,000 $420,000 Less common fixed expense 210,000 140,000 350,000 Operating Income $(23,000) $93,000 $70,000 Yellow is considering closing Store A. If Store A is closed, one-fourth of its traceable fixed expenses would continue to be incurred. Also, the closing of Store A would result in a 20% decrease in sales in Store B. Yellow allocates common fixed expenses on the basis of sales dollars and none of these costs would be saved if a store were shut down. Should Yellow Stores close Store A?
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