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The most recent monthly income statement for Greenie Stores is given below: Total Store A Store B Sales 1,600,000 $700,000 $900,000 Variable expenses 800,000 350,000
The most recent monthly income statement for Greenie Stores is given below: Total Store A Store B Sales 1,600,000 $700,000 $900,000 Variable expenses 800,000 350,000 450,000 Contribution margin 800,000 350,000 450,000 Traceable fixed expenses 500,000 150,000 350,000 Store segment margin 300,000 200,000 100,000 Common fixed expenses 200,000 87,500 112,500 Net operating income $ 100,000 $112,500 ($ 12,500) Due to its poor showing, consideration is being given to closing Store B. Studies show that if Store B is closed, one-fifth (20%) of its traceable fixed expenses will continue unchanged. The studies also show that closing Store B would result in a 20 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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