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Superior Markets, Incorporated, 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, Incorporated Income Statement For the Quarter Ended September 30 516,096 844 760 , 320 405 , 504 691,200 622,080 296, 192 403 , 200 346 , 368 490,240 135 193, 152 161, 408 431,872 596 , 352 507 , 776 $ 94,848 182,784 35, $ 89,6 239,360 2, 736 57,600 384,000 108 , 8 153 , 6 121, 26,880 11,520 $ 89, 6t $ 26,880 $ 38,400 $ 24,320 64, o 15, 360 32, o 135, 68 39, 680 44,800 72, 96 21, 120 28 , 32 96, o 23, 040 490, 24 135, 680 193, 152 161,408 Total North Store South Store Sa tes Cost of goods sold Gross margin Setting and administrative expenses: Setting expenses Administrative expenses Total expenses Net operating income (loss) 2,121,216 1, 718, 784 1, 045, 760 1, 536,000 $ 921,600 $ (26,368) East Store $ 114,304 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: Setting expenses: Sates salaries Direct advertising General advertising* Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery equipment Total setting 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 off Total administrative expenses *Allocated on the basis of sales dollars. Total 1, 045, 760 Total North Store 65 , 28 13 , 824 5, 888 8, 96 3, 84 $ 296,192 North Store g, 6 South Store $ 113,920 92, 160 23, a 7,680 8, 960 3,840 $ 403,2 South Store 25, 11,520 51 , 38 East Sto $ 102,400 81, 6,912 3,840 $ 346,368 East Sto 23 , 040 1,880 23 , 808 34 , 560 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 $14,080 per quarter. The general manager ofthe North Store would continue to earn her normal salary of $15,360 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 $5,120 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. f. 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 officeother" relate to the overall management of Superior Markets, Incorporated 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 $7,680 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 subleased, 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 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 1 Required 2 Required 3 Required 4 Required 5 How much employee salaries will the company avoid if it closes the North Store? Required 2