Problem 13-26 (Algo) Close or Retain a Store (L013-2) 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 Inocne Statenint For the Quarter Ended September 30 Total North Store South Store Sales 53960,000 $ 950.400 31.584.000 $ 1.435.000 Cost of goods sold 2. 187,504 532 224 871.200 784, 080 Gross margin 1.772,496 4181170 712. 800 641 520 Selling and usinistrative expenses: Selling expenses 1. 078 440 305, 446 415.800 357, 192 505, 560 Adsinistrative expenses 13% 920 199, 188 166452 1.584.000 Total expenses 445388 53,644 14.988 $ 188, 496 $ 27. 1923 $97.812 $ 117.875 Net oporating Income oss) 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: 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! Salos salaries Direct advertising General advertising Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivory equipment Total selling expenses "Allocated on the basis of sales dollars. $ 315, 480 246, 840 59,400 396.000 21. 120 27.720 11, 880 $ 1.078, 440 $ 92.400 67.320 14. 256 112,200 6.072 9, 240 3.980 $ 305, 448 $ 117, 480 95, 040 23,760 158.400 7. 920 9.240 3.960 $ 415,800 $ 105.600 84.480 21.384 125.400 7. 128 9.240 3.960 $ 357. 192 Total North Store South Store Bont Storo Administrative expenses: Store managers salaries General office salario Insurance on fixtures and inventory Utilities Enployment taxes General office-others Total administrative expenses "Allocated on the basis of sales dollars. $ 92,400 66.000 33,000 139, 920 75. 240 99,000 $ 505, 560 $ 27, 720 15, 840 9,900 40, 920 21.780 22,760 $ 139, 920 $ 39, 600 26. 400 11, 880 52,800 28.908 39.600 $ 199, 188 $ 25,000 23.780 11. 220 45.200 24. 552 35.540 $ 166, 452 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 $14,520 per quarter. The general manager of the North Store would continue to earn her normal salary of $15.840 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 $5,280 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 . 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, 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 $7,920 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 (clisadvantage) 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 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 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 it 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 1 Required 2 Required 3 Required 4 Required 5 How much employee salaries will the company avoid if it closes the North Store? Employee salaries 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 the North Store were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to S Markets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing Store? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 How much employment taxes will the company avoid if it closes the North Store? Employment taxes Hay CIVIC II cioses the North Store? What is the financial advantage (disadvantage) of closing the North Store? Assuming that the North Store's floor space can't be subleased, would you recommend closing the North Store? - 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 Worth Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as resent 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 What is the financial advantage (disadvantage) of closing the North Store? (Enter any disadvantages" as a negative value.) Financial advantage (disadvantage) Saved Su Help Save & Exit *** 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 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 1 Required 2 Required 3 Required 4 Required 5 Assuming that the North Store's floor space can't be subleased, would you recommend closing the North Store? The North Store should be closed The North Store should not be closed. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 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? (Enter any disadvantages" as a negative value.) Show less Financial advantage (disadvantage)