Chapter 10 PROBLEM 10-26A Close or Retain a Store [LO10-2 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 East Store Store Sales. $3,000,000 $720,000 $1,200,000 $1.080,000 Cost of goods sold....1657 200 403,200 660,000 594,000 Gross margin Selling and administrative expenses 1.342,800 316,800 540,000 486.000 .1 Selling expenses 315.000 270,600 383000 106,000 150,900 126, 100 465.900396,700 89,300 817,000 231,400 Total expenses Net operating income 1,200,000 337400 (loss) 142,800 S(20,600) 74,100 The North Store has consistently shown losses over the past two years. ing consideration to closing the store. The company has asked you to make a recommendation as to For this reason, management is giv store should be closed or kept open. The following additional information is available for whether the your use: a. The breakdown of the selling and administrative expenses is as fol lows: North South Store Total Store Selling expenses: Sales salaries Direct advertising General advertising Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery equipment. $239,000 70.000 $89,000 $80.000 187,000 51,000 72,000 64,000 45,000 10,800 18,000 16,200 300,000 85,000 120,000 95,000 16,000 4,600 6,000 5,400 21,000 7,000 7,000 7,000 9,0003,000 3,000 3000 $817,000 $231,400 $315.000 $270,600 Total seling expenses.... Allocated on the basis of sales dollars. North Store South Store East Store ses: Store management salaries . General office salaries Insurance on fixtures and inventory Utilities Employment taxes $70,000 $21,000 30,000 19,000 50,000 12,000 20,000 18,000 7,500 9,000 8,500 25,000 57,000 6,500 21,900 18,600 75,000 18,000 30,000 27000 $383,000 $106.000 $150.900 $126,100 Allocated on the basis of sales dollars