Question: The most recent monthly income statement for ABC Stores is given below: Total Store A Store B Sales.................................. 1,200,000 $500,000 $700,000 Variable expenses............. 600,000 250,000

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

Total

Store A

Store B

Sales..................................

1,200,000

$500,000

$700,000

Variable expenses.............

600,000

250,000

350,000

Contribution margin..........

600,000

250,000

350,000

Traceable fixed expenses..

400,000

100,000

300,000

Store segment margin.......

200,000

150,000

50,000

Common fixed expenses

150,000

62,505

87,495

Net operating income........

$ 50,000

$87,495

($ 37,495)

Due to its poor showing, consideration is being given to closing Store B. Studies show that if Store B is closed, one-third of its traceable fixed expenses will continue unchanged. The studies also show that closing Store B would result in a 50 percent increase in sales in Store A. The company allocates common fixed expenses to the stores on the basis of sales dollars.

Compute the overall increase or decrease in the company's operating income if Store B is closed. Show your work!

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