IMANET Exam CMA Topic 6 Question 99 Discussion

Condensed monthly operating income data for Korbin, Inc for May follows:

Additional information regarding Korbin's operations follows:

* One-fourth of each store's direct fixed costs would continue if either store is closed.

* Korbin allocates common fixed costs to each store on the basis of sales dollars.

* Management estimates that closing the Suburban Store would result in a 10% decrease in the Urban Store's sales, while closing the Urban Store would not affect the Suburban Store's sales.

* The operating results for May are representative of all months. Korbin is considering a promotional campaign at the Suburban Store that would not affect the Urban Store. Increasing annual promotional expense at the Suburban Store by $60,000 in order to increase this store's sales by 10% would result in a monthly increase (decrease) in Korbin's operating income during the year (rounded) of