4 points Book Superior Markets, Incorporated, operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below. Superior markets, Incorporated Income Statement For the Quarter ended September 30 Total Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total expenses Print net operating inson (loss) North Store South Store $ $ 4,200,000 1,008,000 $ 1,580,000 east Store $ 1,512,000 2,320,080 304,480 924,000 831,500 1,879,920 443,120 750,000 630,400 1,143,800 323,900 441,000 378,840 $34,200 1,680,000 148,400 211,250 176,340 472,300 832,280 553,300 $ 199,920 $ (28,840) $ 103,740 $ 125,020 The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or kept open. The following additional Information is available for your use: a. The breakdown of the selling and administrative expenses that are shown above is as follows: Selling expenses Sales salaries Direct advertising General advertising" Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery equipment Total selling expenses *Allocated on the basis of sales dollars. Administrative expenses: Store managers' salaries General office salaries" Insurance on fixtures and inventory Utilities Employment taxes General office-other* Total administrative expenses *Allocated on the basis of sales dollars. Total North Store South Store East Store $ 334,500 251,800 $ 98,000 71,400 3,000 15,120 $ 124,500 100,800 25,200 $112,000 29,500 22,880 +20,000 119,000 168,000 22,400 131,000 0,440 8,400 7,560 29,400 9,800 9,800 9,800 12,000 4,200 +,200 4,200 $ 1,143,800 $ 323,900 $ 441,000 $ 378,840 Total North Store South Store East Store $ 98,000 $ 29,400 $ 42,000 70,000 $ 20,000 15,800 28,000 25,200 35,000 10,500 12,500 11,900 148,400 43,400 30,000 49,000 79,800 23,100 30,000 20,040 105,000 21,200 42,000 37,800 $ 538,200 $ 148,400 $211,200 $ 178,340 b. The lease on the building housing the North Store can be broken with no pensity. c. The fixtures being used in the North Store would be transferred to the other two stores If the North Store were closed. d. The general manager of the North Store would be retained and transferred to another position in the company if the North Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $15,400 per quarter. The general manager of the North Store would continue to earn her normal salary of $16,800 per quarter. All other managers and employees in the North store would be discharged. e. The company has one delivery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person's salary is $5,600 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but does eventually become obsolete. * The company pays employment taxes equal to 15% of their employees' salaries. g. One-third of the Insurance in the North Store is on the store's fixtures. h. The "General office salaries" and "General office-other relate to the overall management of Superior Markets, Incorporated. If the North Store were closed, one person in the general office could be discharged because of the decrease in overall workload. This person's compensation is $8,400 per quarter. Required: 1. How much employee salaries will the company avoid if it closes the North Store? 2. How much employment taxes will the company avoid if it closes the North Store? 3. What is the financial advantage (disadvantage) of closing the North Store? 4. Assuming that the North Store's floor space can't be subleased, would you recommend closing the North Store? 5. Assume that the North Store's floor space can't be subleased. However, let's Introduce three more assumptions. First, assume that if the North Store were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. Second, assume that the East Store has enough capacity to handle the Increased sales that would arise from closing the North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 3 How much employee salaries will the company avoid if it closes the North Store? Employee salaries < Required 1 Required 2 >