Exercise $22\mathrm{.}7($Algo$)$ Closing an Unprofitable Business Unit $($LO$22-1,$ LO$22-2,$ LO$22-3,$ LO$22-5)$

Shown as follows is a segmented income statement for Drexel$-$Hall during the current month:

Drexel$-$Hall Profit Centers

Store $1$ Store $2$ Store $3$

Dollars $\%$ Dollars $\%$ Dollars $\%$ Dollars $\%$

Sales $ $1,800,000100\%$ $ $600,000100\%$ $ $600,000100\%$ $ $600,000100\%$

Variable costs $1,080,00060372,00062378,00063330,00055$

Contribution margin $ $720,00040\%$ $ $228,00038\%$ $ $222,00037\%$ $ $270,00045\%$

Traceable fixed costs: controllable $432,00024120,00020102,00017210,00035$

Performance margin $ $288,00016\%$ $ $108,00018\%$ $ $120,00020\%$ $ $60,00010\%$

Traceable fixed costs: committed $180,0001048,000866,0001166,00011$

Store responsibility margin $ $108,0006\%$ $ $60,00010\%$ $ $54,0009\%$ $ $(6,000)(1)\%$

Common fixed costs $36,0002$

Income from operations $ $72,0004\%$

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 $$78,000,$ and sales at Store $2$ to increase by $$140,000.$ Closing Store $3$ is not expected to cause any change in common fixed costs.

Required:

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

Total monthly sales for Drexel$-$Hall stores.

The monthly responsibility margin of Stores $1$ and $2.$

The company's monthly income from operations.