Question: Can someone help with this? A step by step solution would be nice. The most recent monthly income statement for Benner Stores is given below:

Can someone help with this? A step by step solution would be nice.

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

Total

Store A

Store B

Sales

$1,000,000

$400,000

$600,000

Variable expense

440,000

160,000

280,000

Contribution margin

560,000

240,000

320,000

Traceable fixed expense

380,000

100,000

280,000

Store segment margin

180,000

140,000

40,000

Common fixed expenses

220,000

90,000

130,000

Net operating income

($40,000)

$50,000

($90,000)

Due to its poor showing, consideration is being given to closing store B. Studies show that is Store B is closed, one-fourth of its traceable fixed expenses will continue unchanged. The studies also show that closing Store B would result in a 10 percent increase in sales in Store A. The company allocates common fixed expenses to the stores on the basis of sales dollars. However, 30% of the common fixed costs can be eliminated if store B closes.

  1. Determine the monthly financial advantage (disadvantage) of closing Store B.

  2. What would be your recommendation for Benners management?

  3. If the one-fourth of Store Bs traceable fixed expenses that remain unchanged are its lease payments, when would you want to reconsider your recommendation from question 2? Why? Show numbers.

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