The most recent monthly income statement for Kennaman Stores is given below:
Less variable expenses
Less traceable fixed expenses
Less common fixed expenses
Net operating income
Kennaman is considering closing Store I. If Store I is closed, one-fourth of its traceable fixed expenses would continue unchanged. Also, the closing of Store I would result in a 20% decrease in sales in Store II. (The decrease in sales would be the result of selling fewer units in store II, not due to reduced selling prices. In addition to sales, what other elements in the budget will be affected?) Kennaman allocates common fixed expenses on the basis of sales dollars.
Compute the overall increase or decrease in Kennaman’s net operating income if Store I is closed.