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DATA INPUT
Mall Store Downtown Store Total
Sales 360,000$ 240,000$ 600,000$
Less: Variable expenses 252,000 96,000 348,000
Contribution margin 108,000$ 144,000$ 252,000$
Less: Fixed expenses 120,000 60,000 180,000
Operating income (12,000)$ 84,000$ 72,000$
Closing of mall store: 10% decrease in downtown store sales
Closing of downtown store: 0% effect on mall store sales
If either store were closed, fixed expenses continue at: 25%
SOLUTION
1. Monthly operating income during if mall store is closed:
Loss of contribution margin at mall store (108,000)$
2. Effect of promotional campaign on operating income:
Increase in contribution margin 10% 10,800$
3. Monthly operating income if the items sold at their variable cost are eliminated:
Restated November data for the mall store as follows:
Items Sold
at their
Variable Cost Other items
Sales 180,000$ * 180,000$ *
Mall Store
