Financial & Managerial Accounting 17th Edition by Jan Williams ,Susan Haka,Mark Bettner,Joseph Carcello

Exercise 36

Shown below is a segmented income statement for Drexel-Hall during the current month:
All stores are similar in size, cam 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 $60,000. and sales at Store 2 to increase by $ 20.000. 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.