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The most recent monthly income statement for Seven Flags Recreation is given below: Total Store A Store B Sales.................................. 1,200,000 $400,000 $800,000 Variable expenses............. 600,000

The most recent monthly income statement for Seven Flags Recreation is given below:

Total

Store A

Store B

Sales..................................

1,200,000

$400,000

$800,000

Variable expenses.............

600,000

180,000

420,000

Contribution margin..........

600,000

220,000

380,000

Traceable fixed expenses..

350,000

100,000

250,000

Store segment margin.......

250,000

120,000

130,000

Common fixed expenses

240,000

80,000

160,000

Net operating income........

$ 10,000

$40,000

($ 30,000)

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 25 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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