What effect will occur to the overall company net income

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Central Apparel Company owns two stores and management is considering eliminating the East store due to declining sales. Contribution income statements are as follows and common fixed costs are allocated on the basis of sales. West East Total Sales $420,000 $90,000 $510,000 Variable costs 210,000 45,000 255,000 Direct fixed costs 50,000 25,000 75,000 Allocated fixed costs 110,000 35,000 145,000 Net Income $ 50,000 ($15,000) $35,000 Central’s management feels that if they eliminate the East store, that sales in the West store will increase by 20%. If the East store is closed, what effect will occur to the overall company net income? A. Increase by $25,000 B. Increase by $22,000 C. Increase by $12,000 D. Increase by $15,000 E. some other answer

Reference no: EM13777929

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