Reference no: EM131727338

Question - Fresh Juice has three locations in Kamloops: Downtown, North Shore and Dufferin. Management is concerned about the performance of the downtown location, the rent is high and management is debating closing the store. A company-wide segmented income statement follows:                                                                                 

	Total	Down- town	North Shore	Dufferin
Sales	$900,000	$300,000	$350,000	$250,000
Variable Expenses	610,000	210,000	225,000	175,000
Contribution Margin	290,000	90,000	125,000	75,000
Traceable Fixed Expenses	225,000	110,000	75,000	40,000
Territorial Segment Margin	65,000	(20,000)	50,000	35,000
Common Fixed Expenses	40,000
Net Operating Income	$25,000

The North Shore and Dufferin locations could expect a 5% decrease in revenues due to lost promotional synergies closing the prominent downtown location.                                                                                        

Required:

Prepare a new segmented income statement assuming the Downtown location is closed.

Should the company close the Downtown location (type YES or NO below)?

What will be the effect on net operating income if the Downtown location is closed (state whether net operating income will increase or decrease and by what amount)?