Condensed Monthly Operating Income Data for Cosmo Inc Three-Quarters of Each Store's Traceable Fixed Expenses Are Avoidable If

question 33

Multiple Choice

Condensed monthly operating income data for Cosmo Inc.for November is presented below.Additional information regarding Cosmo's operations follows the statement:
$\begin{array}{l}\begin{array}{lll}\\ \\ \\\text { Sales}\\\text { Less: Variable Costs}\\\text { Contribution Margin}\\\text { Less: Traceable Fixed Expenses}\\\text { Store Segment Margin}\\\text { Less: Common Fixed Expenses}\\\text { Operating Income (Loss) }\\\end{array}\begin{array}{lll}\\\text { Total }\\\\\$ 200,000 \\\$ \$ 116,000 \\\hline \$ 84,000 \\\$ 60,000 \\\hline \$ 24,000 \\\$ 10,000 \\\hline \$ 14,000\end{array}\begin{array}{lll}\text { Mall }\\\text { Store }\\\\\$ 80,000 \\\$ 32,000\\\$ 48,000\\\$ 20,000 \\\$ 28,000 \\\$ 44,000 \\\$ 24,000\end{array}\begin{array}{lll}\text { Town }\\\text { Store }\\\\\$ 120,000 \\\$ 84,000 \\\hline \$ 36,000 \\\$ 40,000 \\\hline(\$ 4,000) \\\$ 66,000 \\\hline(\$ 10,000) \end{array}\end{array}$
Three-quarters of each store's traceable fixed expenses are avoidable if the store were to be closed. Cosmo allocates common fixed expenses to each store on the basis of sales dollars.
Management estimates that closing the Town Store would result in a 10% decrease in Mall Store sales,while closing the Mall Store would not affect Town Store sales.
The operating results for November are representative of all months.
A decision by Cosmo Inc.to close the Town Store would result in what monthly increase (decrease) in Cosmo's operating income?

• A) ($800).
• B) $4,000.
• C) ($6,000).
• D) ($10,800).

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Definitions:

Nucleic Acids

Large biomolecules essential for all known forms of life, including DNA and RNA, which carry genetic information.

Phospholipids

A class of lipids that are a major component of all cell membranes, consisting of two fatty acids, a glycerol unit, and a phosphate group.

ATP

Adenosine triphosphate, a universal energy currency of cells, used to fuel various cellular processes.

Macronutrient

A type of nutrient required in large amounts for human growth, development and maintenance, including proteins, fats, and carbohydrates.