Question
Jamie Rogers operates a small grocery store with three divisions: Floral, Groceries, and Meats. During the most recent period the company accountant reported the following
Jamie Rogers operates a small grocery store with three divisions: Floral, Groceries, and Meats. During the most recent period the company accountant reported the following results:
| Floral | Groceries | Meat | Total |
Sales | $1,500,000 | $2,300,000 | $2,900,000 | $6,700,000 |
Variable Costs | 1,400,000 | 1,800,000 | 2,400,000 | 5,600,000 |
Fixed Costs | 400,000 | 200,000 | 300,000 | 900,000 |
Income | -$300,000 | $300,000 | $200,000 | $200,000 |
Assume that if the Floral Department is closed sales in groceries will decrease by 10% and 25% of the fixed costs now allocated to the Floral Department will be saved. Under these conditions what will be the effect on income if the Floral Department is closed?
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