Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Northern Stores is a retailer in British Columbia. The most recent monthly income statement for Northern Stores is given below: Total Store 1 Store II
Northern Stores is a retailer in British Columbia. The most recent monthly income statement for Northern Stores is given below: Total Store 1 Store II Sales $2,100,000 $1,300,000 $800,000 Less variable expense 1,260,000 882,000 378,000 Contribution margin $ 840,000 $ 418,000 $ 422,000 Less traceable fixed expense 420,000 231,000 189,000 Segment margin $ 420,000 $ 187,000 $ 233,000 Less common fixed expenses 350,000 210,000 140,000 Operating Income $ 70,000 $ (23,000) $ 93,000 Northern is considering closing Store I. If Store I is closed, one-fourth of its traceable fixed expenses would continue to be incurred. Also, the closing of Store I would result in a 20% decrease in sales in Store II. Northern allocates common fixed expenses on the basis of sales dollars and none of these costs would be saved if a store were shut down. Required: Compute the overall increase or decrease in the operating income of Northern Stores if Store I is closed
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started