Profit Centers Drexel-Hall Store 1 Store 2 Store 3 Dollars % Dollars % Dollars % Dollars % Sales 100% $600,000 100% Variable costs 55 45% $ 1,800,000 1,080,000 $ 720,000 432,000 $ 288,000 180,000 $ 108,000 36,000 $ 72,000 Contribution margin Traceable fixed costs: controllable Performance margin Traceable fixed costs: committed Store responsibility margin Common fixed costs Income from operations 100% $600,000 60 372,000 40% $228,000 24 120,000 16% $108,000 10 48,000 6% $ 60,000 2 4% a # | 35 100% $600,000 378,000 38% $222,000 102,000 18% $120,000 66,000 10% $ 54,000 63 330,000 37% $270,000 17 210,000 20% $ 60,000 10% 11 11 66,000 9% $ (6,000) (1)% All stores are similar in size, carry similar products, and operate in similar neighborhoods. Store 1 was established first and was built at a lower cost than were Stores 2 and 3. This lower cost results in less depreciation expense for Store 1. Store 2 follows a policy of minimizing both costs and sales prices. Store 3 follows a policy of providing extensive customer service and charges slightly higher prices than the other two stores. The marketing manager of Drexel-Hall is considering two alternative advertising strategies, each of which would cost $15,000 per month. One strategy is to advertise the name Drexel-Hall, which is expected to increase the monthly sales at all stores by 5 percent. The other strategy is to emphasize the low prices available at Store 2, which is expected to increase monthly sales at Store 2 by $150,000, but to reduce sales by $30,000 per month at Stores 1 and 3. Determine the expected effect of each strategy on the company's overall income from operations