Situation Four

The most recent monthly income statement for Your Company is given below:

Store A Store B Total Sales $650,000 $900,000 $1,550,000

Variable expenses 225,000 600,000 825,000 Contribution margin 425,000 300,000 725,000

Traceable fixed expenses 110,000 400,000 510,000

Store segment margin 315,000 (100,000) 215,000 Common fixed expenses 50,000 60,000 110,000

Net operating income 265,000 $ (160,000) $105,000

Due to its poor showing, consideration is being given to closing Store B. Studies show that if Store B is closed, 35 percent of its traceable fixed expenses will continue unchanged. The studies also show that closing Store B would result in a 20 percent decrease in sales in Store A. The company allocates common fixed expenses to the stores on the basis of sales dollars.

Required: Compute the overall increase or decrease in the company's operating income if Store B is closed