Reference no: EM132582914

Shown as follows is a segmented income statement for Drexel-Hall during the current month.

• All stores are similar in size, carry similar products, and operate in similar neighborhoods. Store 1 was established first and was built at a lower cost than were Stores 2 and 3. This lower cost results in less depreciation expense for Store 1. Store 2 follows a policy of minimizing both costs and sales prices. Store 3 follows a policy of providing extensive customer service and charges slightly higher prices than the other two stores.
• Top management of Drexel-Hall is considering closing Store 3. The three stores are close enough together that management estimates closing Store 3 would cause sales at Store 1 to increase by $60,000, and sales at Store 2 to increase by $120,000. Closing Store 3 is not expected to cause any change in common fixed costs.

Required:

Question a. What is the total monthly sales for Drexel-Hall stores.

Question b. What is the monthly responsibility margin of Stores 1 and 2.

Question c. What is the company's monthly income from operations.