The most recent monthly income statement for Kennaman Stores is given below:
Total Store I Store II
Sales $2,000,000 $1,200,000 $800,000
Less variable expenses 1,200,000 840,000 360,000
Contribution margin 800,000 360,000 440,000
Less traceable fixed expenses 400,000 220,000 180,000
Segment margin 400,000 140,000 260,000
Less common fixed expenses 300,000 180,000 120,000
Net operating income $ 100,000 $( 40,000) $140,000
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. (The decrease in sales would be the result of selling less units in store II, not due to reduced selling prices. In addition to sales, what other elements in the budget will be affected?) Kennaman allocates common fixed expenses on the basis of sales dollars.
Compute the overall increase or decrease in Kennaman's net operating income if Store I is closed.