Question
The most recent monthly income statement for Benner Stores is given below: Total Store A Store B Sales $1,000,000 $400,000 $600,000 Variable expenses 580,000 160,000
The most recent monthly income statement for Benner Stores is given below:
Total
Store A
Store B
Sales
$1,000,000
$400,000
$600,000
Variable expenses
580,000
160,000
420,000
Contribution margin
420,000
240,000
180,000
Traceable fixed expenses
300,000
100,000
200,000
Store segment margin
120,000
140,000
(20,000)
Common fixed expenses
50,000
20,000
30,000
Net operating income
$70,000
$120,000
$(50,000)
Due to its poor showing, consideration is being given to closing Store B. Studies show that if Store B is closed, one-fourth of its traceable fixed expenses will continue unchanged. The studies also show that closing Store B would result in a 10 percent decrease in sales in Store A. The company allocates common fixed expenses to the stores on the basis of sales dollars.
Determine the monthly financial advantage (disadvantage) of closing Store B.
Select one:
a.Financial (disadvantage) of closing Store B $(70,000)
b.Financial advantage of closing Store B $50,000
c.Financial advantage of closing Store B $120,000
d.Financial (disadvantage) of closing Store B $(54,000)
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