David Mark is a sole trader who owns and operates supermarkets in each of three villages near Ousby. He has drafted his own accounts for the year ended 31 May 20X4 for each of the branches. They are as follows:


The figures for the year ended 31 May 20X4 follow the pattern n of recent years. Because of this, David Mark is proposing to close the Clifearn supermarket immediately.
David Mark employs 12 full-time and 20 par t-time staff. His recruitment policy is based on employing one extra par t-time assistant for ever y £30,000 increase in branch sales. His staff deployment at the moment is as follows:


Peter Gaskin, the manager of the Clifearn supermarket, asks David to give him another year to make the supermarket profitable. Peter has calculated that he must cover £125,500 expenses out of his gross profit in the year ended 31 May 20X5 in order to move into profitability. His calculations include extra staff costs and all other extra costs.
Additional information:
1. General advertising for the business as a whole is controlled by David Mark. This costs £3,960 per annum. Each manager spends a further £1,320 advertising his own supermarket locally.
2. The deliver y vehicle is used for deliveries from the Arton supermarket only.
3. David Mark has a central telephone switchboard which costs £1,584 rental per annum. Each supermarket is charged for all calls actually made. For the year ended 31 May 20X4 these amounted to:
Arton ... £2,112
Blendale ... £1,452
Clifearn .. £1,056
Required:
(a) A report addressed to David Mark advising him whether to close Clifearn supermarket. Your report should include a detailed financial statement based on the results for the year ended 31 May 20X4 relating to the Clifearn branch.
(b) Calculate the increased turnover and extra staff needed if Peter€™s suggestion is implemented.
(c) Comment on the social implications for the residents of Clifearn if
(i) David Mark closes the supermarket,
(ii) Peter Gaskin€™s recommendation isundertaken.

Transcribed Image Text:

Arton Blendale Clfearn Full-time staff (including managers) Part-time staff 4 6