Reposting because last person got required 3 and 4 wrong just those needed
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 North Store $ 3,780,000 $ 907,200 2,088,072 508,032 1,691,928 399,168 South Store $ 1,512,000 831,600 680,400 East Store $ 1,360, 800 748,440 612,360 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total expenses Net operating income (loss) 396,900 190,134 1,029,420 482,580 1,512,000 $ 179,928 291,564 133,560 425, 124 $ (25,956) 340,956 158,886 499,842 $ 112,518 587,034 $ 93,366 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: Total North Store South Store East Store Selling expenses: 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. 301, 140 235,620 56,700 378,000 20,160 26,460 11,340 $ 1,029,420 $ 88,200 64,260 13,608 107,100 5,796 8,820 3,780 $ 291,564 112,140 90,720 22,680 151,200 7,560 8,820 3,780 $ 396,900 $ 100,800 80,640 20,412 119,700 6,804 8,820 3,780 $ 340,956 Total North Store South Store East Store 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. $ 88,200 63,000 31,500 133,560 71,820 94,500 $ 482,580 $ 26,460 15,120 9,450 39,060 20,790 22,680 $ 133,560 $ 37,800 25,200 11,340 50,400 27,594 37,800 $ 190,134 $ 23,940 22,680 10,710 44,100 23,436 34,020 $ 158,886 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 $13,860 per quarter. The general manager of the North Store would continue to earn her normal salary of $15,120 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 $5,040 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 $7,560 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 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? What is the financial advantage (disadvantage) of closing the North Store? (Enter any "disadvantages" as a negative value.) Financial advantage (disadvantage) 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)
