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Question 2 (10 mins, 15 marks)

Northern Stores is a retailer in British Columbia. The most recent monthly statements are below. Northern is considering closing Store I. If it is closed one quarter of its traceable fixed expenses would continue to be incurred. Also the closing of Store I would result in a 20% decrease in sales in Store II. Northern allocated common fixed expenses on the basis of sales dollars, none of which would be saved it a store shuts down.

		Northern Stores
	Total	Store I	Store II
Sales	$ 2,100,000	$ 1,300,000	$ 800,000
Variable Expenses	1,260,000	882,000	378,000
Contribution Margin	840,000	418,000	422,000
Traceable Fixed expenses	420,000	231,000	189,000
Common expenses allocated	350,000	210,000	140,000
Operating Income/Loss	$ 70,000	$ (23,000)	$ 93,000

Required:

Recommend which store, if any, should be eliminated. Prepare a report in good form to support your answer.