continue or Keep? A local home improvement warehouse store shows the following product line income statement for the month. All common fixed costs are allocated to departments based on percentage of sales revenue generated by the department. Sales Paint Lumber Lighting Variable Expenses $500,000 $400,000 $100,000 STORE TOTAL $1,000,000 300.000 Contribution Margin 160.000 50.000 510.000 Less: Direct Fixed 200,000 240,000 50,000 490,000 Expenses 50,000 125,000 40,000 35,000 Less: Common Fixed Costs 100.000 80.000 20.000 200.000 Operating Income (Loss) $50,000 $120,000 $(5,000) $165,000 Scenario #1: Assuming $30,000 of the Lighting Department's direct fixed costs are avoidable, should the store managers discontinue the Lighting Department? CM Less Avoidable FC NO $50000 $30000 $20000 hem. Cu Scenario #2: The space currently occupied by the Lighting Department would be replaced with a Hardware Department that is expected to have sales of $200,000, variable costs of $80,000 and new direct fixed costs o $30,000. Sales VC CM FC OP INC Lost CM FC Savings CM Addt'l OP INC from Hardware Increase in OP INC