For the Quarter Ended September 30 Total North Store South Store East Store Sales $3,500,000 $780,000 $1,400,000 $1,320,000 Cost of goods sold 1,925,000 450,000 749,000 726,000 Gross margin 1,575,000 330,000 651,000 594,000 Selling and administrative expenses: Administrative expenses Selling expenses Total expenses Net operating income (loss) $ 340,000 $(17,400) $ 175,100 $ 182,300 827,000 236,400 317,500 273,100 408,000 111,000 158,400 138,600 1,235,000 347,400 475,900 411,700 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: Total North Store South Store East Store Selling expenses: Sales salaries $228,000 $ 62,600 $ 77,000 $ 88,400 Direct advertising 170,000 56,000 77,000 37,000 General advertising* 52,500 11,700 21,000 19,800 Store rent 325,000 90,000 125,000 110,000 Depreciation of store fixtures 18,500 5,100 6,500 6,900 Delivery salaries 22,500 7,500 7,500 7,500 Depreciation of delivery 10,500 3,500 3,500 3,500 equipment $827,000 $236,400 $317,500 $273,100 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 $ 77,500 $ 23,500 $ 32,500 $ 21,500 52,500 11,800 21,000 19,700 30,000 9,000 11,500 9,500 103,425 31,390 37,700 34,335 57,075 15,810 20,700 20,565 87,500 19,500 35,000 33,000 $408,000 $111,000 $158,400 $138,600