Question
The most recent monthly income statement for ABC Stores is given below: *Please answer fast for a thumbs up and nice comment (: Total Store
The most recent monthly income statement for ABC Stores is given below:
*Please answer fast for a thumbs up and nice comment (:
| Total | Store A | Store B | |
Sales.................................. | 1,200,000 | $500,000 | $700,000 | |
Variable expenses............. | 600,000 | 250,000 | 350,000 | |
Contribution margin.......... | 600,000 | 250,000 | 350,000 | |
Traceable fixed expenses.. | 400,000 | 100,000 | 300,000 | |
Store segment margin....... | 200,000 | 150,000 | 50,000 | |
Common fixed expenses | 150,000 | 62,505 | 87,495 | |
Net operating income........ | $ 50,000 | $87,495 | ($ 37,495) |
Due to its poor showing, consideration is being given to closing Store B. Studies show that if Store B is closed, one-third of its traceable fixed expenses will continue unchanged. The studies also show that closing Store B would result in a 50 percent increase in sales in Store A. The company allocates common fixed expenses to the stores on the basis of sales dollars.
Compute the overall increase or decrease in the company's operating income if Store B is closed. Show your work!
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