Half of the Fenner Road stores dollar sales come from items that are sold at variable cost to attract customers to the store. Managers are considering deleting those items from the product mix. Doing so would reduce the Fenner Road stores direct fixed expenses by 19% but would also reduce the remaining sales volume result by an additional 24%. There would be no effect on the Maple Avenue store.

What effect will this change have on income.

Problem 8-30 (Part Level Submission) Ridley and Scott Mercantile operates two stores, one on Maple Avenue and the other on Fenner Road. Results for the month of May, which is representative of all months are as follows: Maple Avenue Store Fenner Road Store Total Sales Variable expenses Contribution margin Direct fixed expenses Common fixed expenses Total fixed expenses Operating income $84,800 31,200 53,600 19,900 4,800 24,700 $28.900 $120,000 $204,800 115,200 89,600 60,900 9,800 84,000 36,000 41,000 5,000 46,000 70,700 $(10,000) $18,900 The following information pertains to Ridley and Scott's operations . One-fourth of each store's direct fixed expenses would continue if either store were closed . Ridley and Scott allocates common fixed expenses to each store on the basis of sales dollars. Management estimates that closing the Fenner Road store would result in a 10% decrease in the Maple Avenue store's sales, while closing the Maple Avenue store would have no effect on the Fenner Road store's sales (al) Your answer is correct. Calculate the operating income if the Fenner Road store is closed Operating income 8290