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Question - Northern Stores is a retailer in the upper Midwest. The most recent monthly income statement for Northern Stores is given below: Northern is considering closing Store I. If Store I is closed, one-fourth 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.
Total
Store I
Store II
Sales
$2,100,000
$1,300,000
$800,000
Variable expenses
1,260,000
882,000
378,000
Contribution margin
840,000
418,000
422,000
Traceable fixed expenses
420,000
231,000
189,000
Segment margin
187,000
233,000
Common fixed expenses
350,000
210,000
140,000
Net operating income
$70,000
$(23,000)
$93,000
Required - Compute the overall increase or decrease in the net income of Northern Stores if Store I is closed.
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