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Q1) Western Apparel Company owns 2 stores and management is thinking eradicating East store due to declining sales. Segmented contribution income statements are given and common fixed costs are allocated on basis of sales.










Variable costs




Direct fixed costs




Segment margin




Allocated fixed costs




Net Income





Western feels that if they eradicate East store that sales in West store will decline by 25%.  If they close East store, overall company net income will:


a) Decline by $90,000.


b) Decline by $62,000.


c) Decline by $85,625.


d) Decline by $20,000.

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