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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 $5,000,000 $960,000 $2,000,000 $2,040,000 Cost of goods 2,750,000 600,000 1,028,000 1,122,000 sold Gross margin 2,250,000 360,000 972, e80 918,000 Selling and administrative expenses: Selling 857,000 251,480 325,000 280,600 expenses Administrative 483,000 126,000 180,900 176,100 expenses Total expenses 1,340,000 377 400 505,900 456, 700 Net operating income (loss) $ 910,000 $(17,480)$ 466,100 $461,300 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 North South East Total Store Store Store $246,000 $ 64,400 $ 73,000 $188,600 185,000 71,000 92,000 22,000 75,880 14,400 30,000 30,600 283,000 81,000 108,000 94,000 26,000 6,600 8,000 11,400 27,000 9,000 9,000 9,800 15,000 5,000 5,000 5,000 $857,000 $251,480 $325,000 $280,600 "Allocated on the basis of sales dollars. Total North Store South Store East Store $100,000 $ 31,000 $ 40,000 $ 29,000 Administrative expenses: Store managers! salaries General office salaries Insurance on fixtures and inventory Utilities Employment taxes 75,000 14,400 30.000 30,600 45,000 13,500 19,880 12,500 79,800 67.200 25,280 17.820 19, 180 22.800 26,420 26.580 North Store South Store East Store Total $100,000 $ 31,000 $ 40,000 $ 29,000 75,000 14,400 30,000 30,600 45,000 13,500 19,000 Administrative expenses : Store managers salaries General office salaries Insurance on fixtures and inventory Utilities Employment taxes General office- others Total administrative expenses 12,500 70,800 67,200 125,000 25,280 17,820 24,000 19,200 22,800 50,000 26, 420 26,589 51,00 $483,000 $126,000 $180,908 $175, 100 "Allocated on the basis of sales dollars b. The lease on the building housing the North Store can be broken with no penalty 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 filed by hiring a new employee at a salary of $13,400 per quarter. The general manager of the North Store would continue to earn her normal salary of $14.400 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 $6.000 per quartet 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 futures. The "General office salaries and General office-other relate to the overall management of Superior Markets, Inc 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 $7.200 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 fit 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 dosing 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 Required Required Required Required 2 How much employee salaries will the company avoid if it closes the North Store? Employee 1 salaries necuted Required 2 >