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Shown as follows is a segmented income statement for Drexel - Hall during the current month: Drexel - Hall Profit Centers Store 1 Store 2
Shown as follows is a segmented income statement for DrexelHall during the current month:
DrexelHall Profit Centers
Store Store Store
Dollars Dollars Dollars Dollars
Sales $ $ $ $
Variable costs
Contribution margin $ $ $ $
Traceable fixed costs: controllable
Performance margin $ $ $ $
Traceable fixed costs: committed
Store responsibility margin $ $ $ $
Common fixed costs
Income from operations $
All stores are similar in size, carry similar products, and operate in similar neighborhoods. Store was established first and was built at a lower cost than were Stores and This lower cost results in less depreciation expense for Store Store follows a policy of minimizing both costs and sales prices. Store follows a policy of providing extensive customer service and charges slightly higher prices than the other two stores.
Top management of DrexelHall is considering closing Store The three stores are close enough together that management estimates closing Store would cause sales at Store to increase by $ and sales at Store to increase by $ Closing Store is not expected to cause any change in common fixed costs.
Required:
Compute the increase or decrease that closing Store should cause in:
Total monthly sales for DrexelHall stores.
The monthly responsibility margin of Stores and
The company's monthly income from operations.
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