TCI is a company that sells children's books and toys in Ontario. TCI has three retail store locations: London, Hamilton, and Burlington. Operating income is down 15% when compared to last year and TCI management has requested information so they can further analyze performance by store location. The management accountant has prepared the following report for the most recent year of operations:

Total Company. London Store Hamilton Store Burlington Store

Sales $1,800,000 $180,000 $900,000 $720,000

Variable Expenses 900,000 90,000 450,000 360,000

Contribution Margin $900,000 $90,000 $450,000 $360,000

Traceable Fixed Expenses 420,000 70,000 200,000 150,000

Segment (Store) Margin $480,000 $20,000 $250,000 $210,000

Common Fixed Expenses* 250,000 25,000. 125,000. 100,000

Operating Income (Loss) $230,000 ($5,000) $125,000 $110,000

$1,250,000 $350,000 $500,000 $400,000

Average Operating Assets

*TCI allocates common fixed costs on the basis of sales dollars and traceable fixed costs would be eliminated for a store if it is shut down permanently.

Required: Answer each of the below independent scenarios:

a. If management decides to permanently close the London Store location, what impact will it have on TCI's operating income? Should they close the London Store?

b. Management is confident that a new advertising campaign costing $25,000 would help increase sales by 30% at the London location. Should TCI proceed with this decision? Why or why not?

c. Suppose the company is considering expanding the store in Burlington. TCI evaluates ROI for expansion projects based on segment margin. With an investment of $400,000, management expects to generate incremental sales of $500,000 and $150,000 in additional segment margin. Based on ROI, will the manager of the Burlington store want to proceed with the expansion? Why or why not? (provide calculations to support your answer).