Respuesta :
The question is incomplete. The complete question is :
Shown below is a segmented income statement for Drexel-Hall during the current month: Drexel-Hal Store 1 Store 2 Store 3 Sales Variable costs Dollars $1,800.000 100% s600,000 100% S600.000 100% S600.000 100 % 1080,000 60 372,000 62 378,000 63 330,00055 Contribution margin Traceable fixed costs: controllable $ 720,000 432,000 40% 24 $228,000 38 % $222,000 37% $270,000 45% 20,000 20 102,000 17 210,000 35 Performance margin Traceable fixed costs: committed S 288,000 16% $108,000 18% $120,000 20% $60,000 66,000 10% 80,00010 48,000 8 66,000 11 Store responsibility margin $ 108,000 6% $60,000 10% s54,000 9% $ (6,000) (1) % Common fixed costs 36,000 Income from operations $ 72,000 4% All stores are similar in size, carry similar products, and operate in similar neighborhoods. Store 1 was established first and was built at a lower cost than were Stores 2 and 3. This lower cost results in less depreciation expense for Store 1. Store 2 follows a policy of minimizing both costs and sales prices. Store 3 follows a policy of providing extensive customer service and charges slightly higher prices than the other two stores. Top management of Drexel-Hall is considering closing Store 3. The three stores are close enough together that management estimates closing Store 3 would cause sales at Store 1 to increase by $85,000, and sales at Store 2 to increase by $113,000. Closing Store 3 is not expected to cause any change in common fixed costs. Compute the increase or decrease that closing Store 3 should cause in: a. Total monthly sales for Drexel-Hall stores. b. The monthly responsibility margin of Stores 1 and 2. c. The company's monthly income from operations.
Solution :
1. Decrease in the Sale from the stores 3 600,000
Less : increase in sale from stores 1 and 2 180,000
Net decrease 420,000
2. Expected increase in the monthly count
Stores 1 = 60000 x 38% 22,800
Stores 2 = 120000 x 37% 44,400
Less : fixed cost
Monthly responsibility margin 22,800 44,400
3. Increase in the income by eliminating 6,000
store 3
Responsibility margin 67,200
Expected increase in the monthly income 73,200