Problem 13-26 (Algo) Close or Retain a Store [LO13-2] 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 Income Statement For the Quarter Ended September 30 Total Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total expenses Net operating income (loss) $ 3,360,000 1,856,064 North Store $ 806,400 South Store $ 1,344,000 451,584 739,200 East Store $ 1,209,600 665,280 1,503,936 915,040 428,960 1,344,000 354,816 604,800 544,320 259,168 352,800 303,072 118,720 169,008 141,232 377,888 521,808 444,304 $ 159,936 $ (23,072) $ 82,992 $ 100,016 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 "Allocated on the basis of sales dollars. Administrative expenses: Store managers' salaries General office salaries Insurance on fixtures and inventory Utilities Employment taxes General office-other* Total administrative expenses *Allocated on the basis of sales dollars. Total North Store South Store East Store $ 267,680 209,440 50,400 $ 78,400 57,120 12,096 $ 99,680 80,640 20,160 $ 89,600 71,680 18,144 336,000 95,200 134,400 106,4007 17,920 5,152 6,720 6,048 23,520 7,840 7,840 10,080 3,360 3,360 $ 915,040 $ 259,168 $352,800 7,840 3,360 $ 303,072 Total North Store South Store East Store $ 78,400 56,000 28,000 118,720 63,840 84,000 $ 23,520 13,440 8,400 34,720 18,480 20,160 $ 33,600 $ 21,280 22,400 10,080 20,160 9,520 44,800 39,200 24,528 20,832 33,600 30,240 $ 428,960 $ 118,720 $ 169,008 $141,232