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A 00 B c E F G . 1 Drop a Segment - Part 1 of 2 2 Condensed monthly operating income data for Senators Inc. for March 2020 is presented below. 3 4 5 $ 6 - 7 Total Ottawa Store Montreal Store 194,300 $ 80,000 $ 114,300 112,010 32,000 80,010 82,290 48,000 34,290 60,000 20,000 40,000 22,290 28,000 (5,710) 10,000 4,000 6,000 12,290 S 24,000 $ (11,710) Sales Less variable expenses Contribution margin Less traceable fixed expense Segment margin Less common fixed expenses Operating Income 8 9 10 11 S 12 13 14 15 Additional information regarding Senator's operations includes: 75% of each store's traceable fixed expenses are avoidable if the store were to be closed 16 Senator Inc. allocates common fixed expenses to each store on the basis of sales dollars. 17 18 19 Management estimates that closing the Montreal store would result in a 10% decrease in the Ottawa store sales, while closing the Ottawa store would not affect the Montreal store sales. 20 21 22 The operating results for March are representative of all months. 23 A B E G 24 (b) 25 H Senator Inc. is considering a promotional campaign at the Montreal store that would not affect the Ottawa store. Suppose that increasing monthly promotional expenses at the Montreal store by $5,000 will increase the Montreal store sales by 10% 26 27 28 29 Required: 30 (a) A decision by Senator Inc. to close the Montreal store would result in what monthly increase (decrease) in Senator's operating income? 31 32 s 8 8 8 8 33 Sales Avoidable expenses Ottawa Avoidable expenses Montreal Decrease in Sales 194,300 15,000 30,000 8,000 34 35 36 37 Net increase (decrease) in operating income if Montreal store is closed S 141,300 39 $ 40 (b) By how much would the monthly operating income of Senator's increase (decrease)? 41 42 S # 43 Sales Increase in sales Additional expenses S U ) 114,300 11,430 5,000 44 S 45 S 46 Increase (decrease) in monthly operating income S 6,430 7