Condensed monthly operating income data for Cosmo Inc. for November is presented

Question

Condensed monthly operating income data for Cosmo Inc. for November is presented below. dditional information regarding Coso s operations follows the statement. TotalMall Store $200,000 1160003,000 84.000 Town Store $80,000 $120,000 48,000 2000040.000 Sales. Variable expenses 84,000 Contribution margin 36,000 Traceable fixed expenses. Store segment margin. 24,000 28,000 (4,000) Common fixed expenses 4.000 24,000 Net operating income 400g 10.000) Cosmo allocates common fixed expenses to each store on the basis of sales dollars. Management estimates that closing the Town Store would result in a 10% decrease in Mall Store's sales. The operating results for November are representative of all months. A decision by Cosmo Inc. to close the Town Store would result in a monthly increase (decrease) in Cosmo's net operating income of (choose the closest answer): A. $4,000 B. S(10,800) C. S(800) D. S(4,000) E. $2,000

Explanation / Answer

loss

Contribution margin of town store -36,000

decrease in contr of mall store -( 48,000 * .10 ) -4800   

Fixed Expenses + 40,000 * 3/4 30000

Loss = - ($10,800)

Cosmo

loss

Contribution margin of town store -36,000

decrease in contr of mall store -( 48,000 * .10 ) -4800   

Fixed Expenses + 40,000 * 3/4 30000

Loss = - ($10,800)

Ans B -10800

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