Marshal Costumes owns two stores and management is considering eliminating the Mandarin store due to declining sales. Common fixed costs are allocated on the basis of sales. Contribution income statements are as follows:

Marshals management feels that if they eliminate the Mandarin store, that sales in the Arlington store will increase by 10%. If the Mandarin store is closed, what is the incremental effect on profit for Marshal Costumes?

Group of answer choices

Decrease by $36,000

Increase by $22,000

Decrease by $20,000

Increase by $17,000

Sales Variable costs Direct fixed costs Allocated fixed costs Net Income Arlington $300,000 160,000 40,000 80,000 $ 20,000 Mandarin $200,000 130,000 20,000 65,000 $ (15,000) Total $500,000 290,000 60,000 145,000 $ 5,000