Shown below is a segmented income statement for Holmgren-Mulchan during the current month: Profit Centers Holmgren-Mulchan Store 1 Store 2 Store 3 Dollars % Dollars % Dollars % Dollars % Sales $ 1,800,000 100 % $ 600,000 100 % $ 600,000 100 % $ 600,000 100 % Variable costs 1,080,000 60 372,000 62 378,000 63 330,000 55 Contribution margin $ 720,000 40 % $ 228,000 38 % $ 222,000 37 % $ 270,000 45 % Traceable fixed costs: controllable 432,000 24 120,000 20 102,000 17 210,000 35 Performance margin $ 288,000 16 % $ 108,000 18 % $ 120,000 20 % $ 60,000 10 % Traceable fixed costs: committed 180,000 10 48,000 8 66,000 11 66,000 11 Store responsibility margins $ 108,000 6 % $ 60,000 10 % $ 54,000 9 % $ (6,000 ) (1 ) % Common fixed costs 36,000 2 Income from operations $ 72,000 4 % All stores are similar in size, carry 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 Holmgren-Mulchan 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 $74,000, and sales at Store 2 to increase by $133,000. Closing Store 3 is not expected to cause any change in common fixed costs. Assuming we close Store 3, please answer the following: a. Compute the net increase/decrease in the total monthly sales for Holmgren-Mulchan stores.expected in total monthly sales $ b. Compute the net increase/decrease in the monthly responsibility margin of Stores1. Expected increases in monthly responsibility margins Store 1 $ Store 2 $Compute the net increase/decrease in the company's monthly income from operations.Expected in monthly operating income.