Question

Dalton Co. follows a policy of allocating all common costs equally among its profit centers. A partial responsibility income statement for a typical month is shown below:

	Dalton Co.			Profit Center 1			Profit Center 2			Profit Center 3
Responsibility margins	$	200,000		$	80,000		$	70,000		$	50,000
Common fixed costs	$	165,000		$	55,000		$	55,000		$	55,000
Income from operations	$	35,000		$	25,000		$	15,000		$	(5,000	)

After evaluating these data, Dalton Co. decides to close Profit Center 3. This action eliminates all revenue, variable costs, and fixed costs traceable to Center 3, but eliminates only $35,000 in common fixed costs. Closing Profit Center 3 has no effect upon the responsibility margins of Centers 1 and 2.

Closing Profit Center 3 should cause Dalton's monthly operating income to:

Answer 1