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Northern Stores is a retailer in the upper Midwest. The most recent monthly income statement...

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Accounting

Northern Stores is a retailer in the upper Midwest. The most recent monthly income statement for Northern Stores is given below:

Total Store I Store II
Sales $2,100,000 $1,300,000 $800,000
Less variable expenses 1,300,000 942,000 358,000
Contribution margin 800,000 358,000 442,000
Less traceable fixed expenses 300,000 111,000 189,000
Segment margin 500,000 247,000 253,000
Less common fixed expenses 500,000 250,000 250,000
Net income (loss) $0 ($3,000) $3,000

Northern is considering closing Store I. If Store I closed, one-half of its traceable fixed expenses would continue to be incurred. Also, the closing of Store I would result in a 10% decrease in contribution margin in Store II. Northern allocates common fixed expenses based on sales dollars and none of these costs would be saved if a store were shut down. Required: Compute the overall increase or decrease in the net income of Northern Stores if Store I closed.

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