Marshal Costumes Owns Two Stores and Management Is Considering Eliminating

question 113

Multiple Choice

Marshal Costumes owns two stores and management is considering eliminating the Mandarin store due to declining sales.Common fixed costs are allocated on the basis of sales.Contribution income statements are as follows: $\begin{array}{lrrr}&\text { Arlington }&\text {Mandarin}&\text { Total }\\\text { Sales } & \$ 300,000 & \$ 200,000 & \$ 500,000 \\\text { Variable costs } & 160,000 & 130,000 & 290,000 \\\text { Direct fixed costs } & 40,000 & 20,000 & 60,000 \\\text { Allocated fixed costs } & 80,000 & 65,000 & 145,000 \\\text { Net Income } & \$ 20,000 & \$(15,000) & \$ 5,000\end{array}$ Marshal's management feels that if they eliminate the Mandarin store, that sales in the Arlington store will increase by 10%.If the Mandarin store is closed, what is the incremental effect on profit for Marshal Costumes?

• A)Increase by $17,000
• B)Decrease by $36,000
• C)Increase by $22,000
• D)Decrease by $20,000

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Definitions:

Narcissistic Personality Disorder

A mental condition characterized by a long-term pattern of exaggerated self-importance, need for admiration, and a lack of empathy for others.

Obsessive-Compulsive Personality Disorder

A personality disorder characterized by a preoccupation with orderliness, perfectionism, and control, at the expense of flexibility, openness, and efficiency.

Schizotypal Personality Disorder

A mental disorder characterized by severe social anxiety, thought disorder, paranoid ideation, derealization, transient psychosis, and often unconventional beliefs.

Antisocial Personality Disorder

A mental health disorder characterized by a long-term pattern of disregard for, or violation of, the rights of others.