Question
The most recent monthly income statement for Your Company is given below: total store A Store B Sales $1,000,000 400,0000 600,000 Variable expenes 580,000 160,000
The most recent monthly income statement for Your Company is given below: total store A Store B
Sales $1,000,000 400,0000 600,000
Variable expenes 580,000 160,000 420,0000
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 expenes 50,000 20,000 30,0000
Net operating income 70,000 120,0000 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. Required: Compute the overall increase or decrease in the company's operating income if Store B is closed.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started