A retail store operates three stores in its sales territory. A segmented absorption costing income statement for the company for the last quarter is as follows: Sales Territory Income Statement For the Quarter Ended June 30, 20XX Total Store#1 Store#2 Store#3 Sales$6,000,000 $1,440,000 $2,400,000 $2,160,000 CGS 3,314,400 806,400 1,320,000 1,188,000 Gross margin:

2,685,600 633,600 1,080,000 972,000 S & A expense Selling:

634,000 462,800 630,000 541,200

Administrative:

766,000 212,000 301,800 252,200 Total expense:

2,400,000 674,800 931,800 793,400 Net operating income (loss):

$ 285,600 $(41,200) $148,200 $178,600 Store #1 has consistently shown losses over the past two years. The company has asked you to make a recommendation as to whether the store should be closed or kept open. The company has provided you with the following information: a] Selling and administrative expenses are broken down as follows; Total Store#1 Store#2 Store#3 Selling expenses: Sales salaries $478,000 $140,000 $178,000 $160,000 Direct advertising 374,000 102,000 144,000 128,000 General advertising¹ 90,000 21,600 36,000 32,400 Store rent 600,000 170,000 240,000 190,000 Depreciation-store fixtures 32,000 9,200 12,000 10,800 Deliver salaries 42,000 14,000 14,000 14,000 Depreciation-delivery equip 18,000 6,000 6,000 6,000 Total selling expense $1,634,000 $ 462,800 $ 630,000 $541,200 ¹allocated on the basis of sales dollars.

Total Store#1 Store#2 Store#3 Administrative expense: Store management salaries:

$140,000 $ 42,000 $ 60,000 $ 38,000 General office salaries^:

¹ 100,000 24,000 40,000 36,000 Insurance on fixtures & inventory:

50,000 15,000 18,000 17,000 Utilities:

212,000 62,000 80,000 70,000 Employment taxes:

114,000 33,000 43,800 37,200 General office-other¹:

150,000 36,000 60,000 54,000 Total administrative expense:

$766,000 $212,000 $301,800 $252,200 ¹allocated on the basis of sales dollars.

b] The lease on store#1 can be broken with no penalty. c] The fixtures from store#1 would be transferred to the other two stores if store#1 is closed. d] The general manager of store#1 would be retained and transferred to another position in the region if store#1 is closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $22,000 per quarter. The general manager of store#1 would retain her current salary of $24,000 per quarter. All other employees of store#1 will be discharged. e] The region has one delivery crew that serves all three stores. One delivery person could be discharged if store#1 were closed; this person