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Condensed monthly operating income data for Korbin Inc. for May follows: Urban Store Suburban Store Total Sales $80,000 $120,000 $200,000 Variable costs 32,000 84,000 116,000 Contribution margin $48,000 $ 36,000 $84,000 Direct fixed costs 20,000 40,000 60,000 Store segment margin $28,000 $ (4,000) $24,000 Common fixed cost 4,000 6,000 10,000 Operating income $24,000 $(10,000) $14,000 Additional information regarding Korbin's operations follows: ●One-fourth of each store's direct fixed costs would continue if either store were closed. ●Korbin allocates common fixed costs to each store on the basis of sales dollars. ●Management estimates that closing the Suburban Store would result in a 10% decrease in the Urban Store's sales, while closing the Urban Store would not affect the Suburban Store's sales. ●The operating results for May are representative of all months. A decision by Korbin to close the Suburban Store would result in a monthly increase (decrease) in Korbin's operating income of
A. $(1,200) B. $4,000 C. $(6,000) D. $(10,800) |