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The most recent monthly income statement for Acme Corp. is given below: store 1 store 2 total sales $625,000 $930,000 $1,555.000 variable expenses 210,000 560,000
The most recent monthly income statement for Acme Corp. is given below:
store 1 | store 2 | total | |
---|---|---|---|
sales | $625,000 | $930,000 | $1,555.000 |
variable expenses | 210,000 | 560,000 | 770,000 |
contribution margin | 415,000 | 370,000 | 785,000 |
traceable fixed expenses | 120,000 | 425,000 | 545,000 |
store segment margin | 295,000 | (55,000) | 240,000 |
common fixed expenses | 65,000 | 75,000 | 140,000 |
net operating income | 230,000 | $(130,000) | $100,000 |
Due to its poor showing, consideration is being given to closing Store 2. Studies show that if Store 2 is closed, 43 percet of its traceable fixed expenses will continue unchanged. The studies alo show that closing Store 2 would result in a 2 percent decrease in sales in Store 1. The company allocates common fixed expenses to the store on the basis of sales dollars.
Compute the overall increase or decrease in the company's operating income if Store 2 is closed.
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