Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
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 Market, Thcorporated Incone Statement For the Quarter Ended September 30 Total North Store South Store Et store Sale $ 3.300.000 $ 792,000 1.320.000 $ 1.188,000 Coat of good olg 1920 443.530 726.000 Gronin 147.00 318080 394.000 534,000 Selling and administrative expune Selling expenses 898, 700 154.540 346, 500 297.660 Administrative 44.00 116 500 165.990 138.710 Total expenses 1320,000 371. 140 512490 SY Net operating incon (los) 157.00 5 ( 800) $ 81.510 $98.230 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 East Store Selling expenties: Sales salaries Direct advertising General advertising Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery equipment Total selling expenses "Allocated on the basis of sales dollars $ 262,900 205,700 49,500 330,000 17. 600 23. 100 9.900 $.898.700 North Store $ 77,000 56,100 11. 880 93,500 5060 7.700 3,300 $ 254, 540 South Store $ 97, 900 79. 200 19.800 132.000 6,600 7. 700 3,300 $ 346,500 $ 88,000 70.400 17.820 104.500 5. 90 7,200 3.300 $ 297, 680 Total North Store South Store East Store Administrative expenses: Store sanngers salaries General office salaries Insurance on fixtures and inventory Utilities Employment taxes General office-other Total dinistrative expose "Allocated on the basis of sales dollars. $ 77,000 55.000 27.500 116,500 62.700 82.500 $ 421.300 $ 23, 100 13, 200 8.250 34. 100 18, 150 19.800 $116, 600 $ 33.000 22.000 9, 900 44.000 24.090 33.000 $ 165.990 $ 30,000 19,800 9.350 38,500 20. 460 29.700 $ 138, 710 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 $12,100 per quarter. The general manager of the North Store would continue to earn her normal salary of $13,200 per quarter All other managers and employees in the North store would be discharged. e. The company has one dellvery crew that serves all three stores One delivery person could be discharged if the North Store were closed. This person's salary is $4,400 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, 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 $6.600 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 it 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 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 salanes Required 2 > 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 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 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 employment taxes will the company avoid if it closes the North Store? Employment taxes - 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, ass the North Store were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Supe Markets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from closir North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the Store? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 What is the financial advantage (disadvantage) of closing the North Store? (Enter any disadvantages" as a negative value.) Financial advantage (disadvantage) Help Sau How much employee salaries will the company avoid if it closes the North Store? How much employment taxes will the company avoid if it closes 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, The North Store were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Sur Markets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from clos 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 the 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. Save & Exit Saved Help larkets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from closing the orth Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales 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 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)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Brinks Modern Internal Auditing A Common Body Of Knowledge

Authors: Robert R. Moeller

7th Edition

0470293039, 978-0470293034

More Books

Students also viewed these Accounting questions