Northern Stores is a retailer in the upper Midwest. The most recent monthly income statement for Northern Stores is given below: Northern is considering closing Store I. If Store I is closed, one-fourth of its traceable fixed expenses would continue. Also, the closing of Store I would result in a 20% decrease in sales in Store II. Northern allocates common fixed expenses on the basis of sales dollars and none of these costs would be saved if a store were shut down.
Required:
Compute the overall increase or decrease in the net operating income of Northern Stores if Store I is closed.

Question

Northern Stores is a retailer in the upper Midwest. The most recent monthly income statement for Northern Stores is given below:  Northern is considering closing Store I. If Store I is closed, one-fourth of its traceable fixed expenses would continue. Also, the closing of Store I would result in a 20% decrease in sales in Store II. Northern allocates common fixed expenses on the basis of sales dollars and none of these costs would be saved if a store were shut down.
Required:
Compute the overall increase or decrease in the net operating income of Northern Stores if Store I is closed.

Quizplus · Accepted Answer

The Answer of Northern Stores is a retailer in the upper Midwest. The most recent monthly income statement for Northern Stores is given below:  Northern is considering closing Store I. If Store I is closed, one-fourth of its traceable fixed expenses would continue. Also, the closing of Store I would result in a 20% decrease in sales in Store II. Northern allocates common fixed expenses on the basis of sales dollars and none of these costs would be saved if a store were shut down.
Required:
Compute the overall increase or decrease in the net operating income of Northern Stores if Store I is closed.

Northern Stores Is a Retailer in the Upper Midwest