Reference no: EM132793887

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:

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