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  3. the most recent monthly income statement for green

The most recent monthly income statement for Greenie Stores is given below: ...

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Accounting

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! (14 PTS)

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