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: Sales Superior Markets, Incorporated Income Statement For the Quarter Ended September 30 Cost of goods sold i Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total expenses Net operating income (loss) Total $3,300,000 1,822,920 North Store South Store $ 792,000 $ 1,320,000 443,520 726,000 East Store $ 1,188,000 653,400 1,477,080 348,480 594,000 534,600 898,700 254,540 346,500 297,660 421,300 116,600 165,990 138,710 1,320,000 371,140 512,490 436,370 $157,080 $ (22,660) $ 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: 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. Total North Store South Store East Store $ 262,900 205,700 49,500 $ 77,000 56,100 11,880 $ 97,900 $88,000 79,200 70,400 19,800 17,820 330,000 93,500 132,000 104,500 17,600 5,060 6,600 5,940 23,100 7,700 7,700 7,700 9,900 3,300 3,300 3,300 $ 898,700 $254,540 $346,500 $297,660