Reference no: EM132552600

The most recent monthly income statement for Kennaman Stores is given below:
                             

                                        Total                    Store I                       Store Il
Sales......              $2,000,000               $1,200,000               $800,000
Variable expenses.     1,200,000             840,000                   360,000
Contribution margin....    800,000          360,000                 440,000
Traceable fixed expenses      400,000          220,000           180,000
Segment margin........            400,000          140,000        260,000
Common fixed expenses          300.000         180.000        120,000
Net operating income            $ 100,000         $ (40,000)        $140,000

Question 1- Kennaman is considering closing Store I. If Store I is closed, one-fourth of its traceable fixed expenses would continue unchanged. Also, the closing of Store I would result in a 20% decrease in sales in Store II. So, the overall increase or decrease in Kennaman's net operating income if Store I is closed is

Select one:

a. Decrease by $283,000

b. Increase by $220,000

c. Increase by $237,000

d. Decrease by $250,000