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please answer the requirements thanks :) Superior Markets, Inc. operates three stores in a large metropolitan area. A segmented absorption costing income statement for the
please answer the requirements thanks :)
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 Incone Staten For the Quarter Ended September 30 Moth South Total Store Stoc Solus 54.200,000 $1,000,000 $1,650,00 $1,512,00 Cost of wood so 2.320.000 5664 26,000 100 Gross wangi 3570 175.000 0. Selling and ministrative penet Sellistes 1,143,800 523,00 46, 375.4 inistrative 536/700 14400 2112 126,5 Total expenses 1.650.000 63240 5552100 Het werotinine (1) $ 199,90 5 (20) 1103,805 125,020 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 $ 334,600 $ 98 , $124 , 6 $112 , . 261,800 71,400 100,800 89,600 63,000 15,120 25,200 22,689 420,000 119,000 168,000 133,000 22,400 6,440 8,400 7,560 29,400 9,800 9,800 9,800 12,600 4,200 4,200 4,200 $1,143,800 $323,960 $441,000 $378,840 "Allocated on the basis of sales dollars. North Store South Store East Store Total Administrative expenses: Store managers' salaries General office salaries Insurance on fixtures and inventory Utilities Employment taxes General office-other" Total administrative expenses $ 98,000 7 70,000 35,000 148,490 79,800 105,000 $536,200 $.29,400 16,800 10,500 43,400 23,100 25, 200 $148, 480 $ 42,000 28,000 12,600 56,000 30,660 42,800 $ 211,260 $ 26,600 25,200 11,900 49,000 26,040 37,800 $176,548 *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 filled by hiring a new employee at a salary of $15,000 per quarter. The general manager of the North Store would continue to earn her normal salary of $16.800 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 in the North Store were closed. This person's salary is $5,600 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 1. The company pays employment taxes equal to 15% of their employees salaries. g. 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 overall workload. This person's compensation is $8.400 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 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 sublessed, would you recommend closing 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 soles in the East store Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store Step by Step Solution
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