Northern Apparel Company owns two stores and management is considering eliminating the South store due to declining sales.

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16.

Northern Apparel Company owns two stores and management is considering eliminating the South store due to declining sales. Segmented contribution income statements are as follows and common fixed costs are allocated on the basis of sales.

North

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South

Total

Sales

$475,000

120,000

$595,000

Variable costs

242,500

69,000

311,500

Direct fixed costs

72,500

35,500

108,000

Segment margin

160,000

15,500

175,500

Allocated fixed costs

104,500

48,000

152,500

Net Income

$55,500

($32,500)

$23,000

Northern feels that if they eliminate the South store, sales in the North store will decline by 20%. If they close the South store, overall company net income wiall?

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