The most recent monthly income statement for Kennaman Stores is given below: Kennaman is considering closing Store I. If Store I is closed, one-fourth of its traceable fixed expenses would continue unchanged. Also, the closing of Store I would result in a 20% decrease in sales in Store II. Kennaman allocates common fixed expenses on the basis of sales dollars.
Required:
Compute the overall increase or decrease in Kennaman's net operating income if Store I is closed.

Question

The most recent monthly income statement for Kennaman Stores is given below:  Kennaman is considering closing Store I. If Store I is closed, one-fourth of its traceable fixed expenses would continue unchanged. Also, the closing of Store I would result in a 20% decrease in sales in Store II. Kennaman allocates common fixed expenses on the basis of sales dollars.
Required:
Compute the overall increase or decrease in Kennaman's net operating income if Store I is closed.

Quizplus · Accepted Answer

The Answer of The most recent monthly income statement for Kennaman Stores is given below:  Kennaman is considering closing Store I. If Store I is closed, one-fourth of its traceable fixed expenses would continue unchanged. Also, the closing of Store I would result in a 20% decrease in sales in Store II. Kennaman allocates common fixed expenses on the basis of sales dollars.
Required:
Compute the overall increase or decrease in Kennaman's net operating income if Store I is closed.

The Most Recent Monthly Income Statement for Kennaman Stores Is