Compute the overall increase or decrease in the net income

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Reference no: EM132788407

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

420,000

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.

Reference no: EM132788407

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