Cosmo Inc. operates two retail novelty stores: the Mall Store and the Town Store. Condensed monthly operating income data for Cosmo Inc. for November are presented in the accompanying table. Additional information regarding Cosmo's operations follows the statement. Mall Store Town Store Total a. Sales $80,000 $120,000 $200,000 b. Less variable costs 32,000 84,000 1 16,000 C. Contribution margin $48,000 $36,000 $84,000 Less direct fixed expenses 20,000 40,000 60,000 e. Store segment margin $28,000 ($4,000) $24,000 f. Less headquarters fixed expenses 4,000 6,000 10,000 g. Operating income $24,000 ($10,000) $14,000 One-fourth of each store's direct fixed expenses would continue through December of next year if either store were closed. Cosmo allocates headquarters fixed expenses to each store on the basis of sales dollars. Management estimates that closing the Town Store would result in a 10% decrease in Mall Store sales, while closing the Mall Store would not affect Town Store sales The operating results for November are representative of all months. Requirements: 1. If Cosmo Inc. decides to close the Town Store, how does that decision change Cosmo's monthly operating profit during next year? Calculations are required. 2. If Cosmo Inc. decides to have a promotional campaign at the Town Store that would not affect the Mall Store, but would increase the annual promotional expenses at the Town Store by $60,000 (which is expected to increase sales by 10%), how does that decision change Cosmo's monthly operating profit during next year? Calculations are required. 3. Half of the Town Store's sales are from items sold at variable cost to attract customers to the store. If Cosmo Inc. considers the elimination of this items that would reduce the Town's direct expenses by 15% and result in the loss of 20% of the remaining Town's sales volume (no effect on the Mall Store), how does that decision affect the operating income of the company if the items sold at cost are eliminated? Calculations are required