Cemy Superior Markets, Inc., 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, Inc. Income Statement For the Quarter Ended September 30 North South East Total Store Store Store Sales $4,000,000 $40,000 $1,600,000 $1,500,000 Cost of goods sold 2,209,000 495,000 847,000 850.000 Gross sargin 0,000 25.00 Setting and dinistrative expenses Selling expenses 837.ee 241,400 320.00 275,600 Administrative expenses 433,000 116.000 165.000 151, 100 Total expenses 1.270,000 25 4850 2020 Not operating income (Loss) $530,000 $112,400) 267,100 $275,300 The North Store hos 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: VY 4 Store Selling expenses sales salaries Direct advertising General advertising Store rent Depreciation of store Fixtures Delivery salaries Depreciation et delivery mient Total selling expenses *Allocated on the basis of sales dollars. North South East Total Store Store $235,000 $ 55,200 $80,000 $ 96,000 175.000 61,000 82.000 32,000 60.000 12,600 24,00 23,400 310,000 95,000 112,000 100.000 21,600 5.600 0,400 24,000 8.000 11,000 12,000 4.000 4,90 4,000 58.37,000 1241.400 5320,000 $275,600 2.000 Administrative expenses Store managers salaries General office salariese Insurance on Fixtures and inventory Utilities Exployment takes General office-others Total udsinistrative expenses North South East Total Store Store Store 85,000 $26.000 $ 35,000 24.000 60,000 12,6 24,000 23,400 35,000 18.500 14,000 10,500 92,400 30,630 30,400 31.370 60,600 15,270 22,500 22,830 100.000 21.000 40,000 39.000 5433.600 $116.6805165,900 5151, 100 Alocated on the basis of sales dollars b. The lease on the building housing the North Store can be broken with no penalty 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 filing a position that would otherwise be filled by hiring a new employee at a salary of $11.600 per quarter. The general manager of the North Store would continue to earn her normal salary of $12.600 per quarter. All other managers and employees in the North store would be discharged 3 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 $5,000 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 9. 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, Inc. If the North Store were closed, one person in the general office could be discharged because of the decrease in overal workload. This person's compensation is $6.300 per quarter. 4 19 Required: 1. How much employee salaries will the company avoid 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 subieased, would you recommend closing the North Store? 5. Assume that the North Store's floor space can't be subleased. However, les introduce three more assumptions. First, assume that 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? Refren Complete this question by entering your answers in the tabs below. Required 1 Required Required Required Required How much employee salaries was the company avoid if it closes the North Store? Eelne Required)