Reference no: EM132521636

Northern Stores is a retailer in British Columbia. The most recent monthly income statement for Northern Stores is given below:

                                            Total                    Store 1                        Store II

Sales                           $2,100,000         $1,300,000                    $800,000

Less variable expense        1,260,000             $882,000                    $378,000

Contribution margin            $840,000              $418,000                    $422,000

Less traceable fixed expense   420,000             231,000                    189,000

Segment margin                       $420,000          $187,000               $233,000

Less common fixed expense        350,000            210,000                 140,000

Operating Income                      $70,000              $23,000                 $93,000

• Northern is considering closing Store I. If Store I is closed, one-fourth (25%) of its traceable fixed expenses would continue to be incurred. Also, the closing of Store I would result in a 20% decrease in sales in Store II.
• Northern allocates common fixed expenses on the basis of sales dollars and none of these costs would be saved if a store were shut down.

Required:

Question 1: Compute the overall increase or decrease in the operating income of Northern Stores if Store I is closed.