Shown as follows is a segmented income statement for Drexel-Hall during the current month.

Profit Centers

Drexel-Hall

Store 1

Store 2

Store 3

Dollars%Dollars%Dollars%Dollars%Sales$1,800,000100%$600,000100%$600,000100%$600,000100%Variable costs1,080,00060372,00062378,00063330,00055Contribution margin$720,00040%$228,00038%$222,00037%$270,00045%Traceable fixed costs: controllable432,00024120,00020102,00017210,00035Performance margin$288,00016%$108,00018%$120,00020%$60,00010%Traceable fixed costs: committed180,0001048,000866,0001166,00011Store responsibility margin$108,0006%$60,00010%$54,0009%$(6,000)(1)%Common fixed costs36,0002Income from operations$72,0004%

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.

Top management of Drexel-Hall is considering closing Store 3. The three stores are close enough together that management estimates closing Store 3 would cause sales at Store 1 to increase by $87,000, and sales at Store 2 to increase by $150,000. Closing Store 3 is not expected to cause any change in common fixed costs.

Compute the increase or decrease that closing Store 3 should cause in:

a.Total monthly sales for Drexel-Hall stores.

b.The monthly responsibility margin of Stores 1 and 2.

c.The company's monthly income from operations.