Question
Northern Apparel Company owns two stores and management is considering eliminating the South store due to declining sales. Segmented contribution income statements are as follows
Northern Apparel Company owns two stores and management is considering eliminating the South store due to declining sales. Segmented contribution income statements are as follows and common fixed costs are allocated on the basis of sales.
Northern feels that if they eliminate the South store, sales in the North store will decline by 20%. If they close the South store, overall company net income will: |
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| A. decline by $90,000. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| B. decline by $85,625. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| C. decline by $62,000. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| D. decline by $20,000. |
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