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Shown below is a segmented income statement for Drexel-Hall cluring the current month: Profit Centers ars $1.800.000 100 % s600.000 100 % s600000100 %600.000 100%
Shown below is a segmented income statement for Drexel-Hall cluring the current month: Profit Centers ars $1.800.000 100 % s600.000 100 % s600000100 %600.000 100% Sales Variable costs 1080,000 60 3/2000 62 8.00 63 330,000 55 Contribution margin Traceable fixed cousts contrallable $720000 40 % S228 000 38 % $222,000 37% $.270,000 45% 432.000 24 20000 20 102 000O 17 210,000 35 Performance marg Traceable foved costs: committed $288.000 16% s108.000 18% $120.000 20% $60,000 10% 180,000 0 48,000 8 66,000 1 66,000 1 Store responsibility margin s108,000 6% s 60.000 10% s 54.000 9% (6.0001 % Common fixed costs 36,000 2 Income from operations 72.000 4% All stores are similar in size, carry similar products, and operate in sirnilar neighborhoods. Store wasestablished first and was built at a lower cost than were Stores 2 and . This lower cost results in less depreciation expense rer 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 othen two stcres Top management of Drexel Hall is corsidering 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 $71,000, and sales at Store 2 to increase by 5145,000. Closing Store 3 is not expected to cause any change in common fixed costs. Compute the Iincrease 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. Store 1 Store 2 c. The company's monthly income from operations
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