Style, Inc. operates three stores in a large metropolitan area. The companys segmented absorption costing income statement for the last quarter follows:

Style, Inc.
Income Statement
For the Quarter Ended March 31
	Total	Uptown Store	Downtown Store	Eastpark Store
Sales	$ 2,500,000	$ 900,000	$ 750,000	$ 1,000,000
Cost of goods sold	1,450,000	513,000	522,000	565,000
Gross margin	$ 1,050,000	$ 387,000	$ 228,000	$ 435,000
Selling and administrative expenses:
Selling expenses:
Direct advertising	118,500	40,000	36,000	42,500
General advertising	20,000	7,200	4,800	8,000
Sales salaries	157,000	52,000	45,000	60,000
Delivery salaries	30,000	10,000	10,000	10,000
Store rent	215,000	70,000	60,000	80,000
Depreciation of store fixtures	46,950	18,300	8,800	19,850
Depreciation of delivery equipment	27,000	9,000	9,000	9,000
Total selling expenses	614,450	206,500	173,600	229,350
Administrative expenses:
Store management salaries	63,000	20,000	18,000	25,000
General office salaries	50,000	18,000	12,000	20,000
Utilities	89,800	31,000	27,200	31,600
Insurance on fixtures and inventory	25,500	8,000	9,000	8,500
Employment taxes	36,000	12,000	10,200	13,800
General office expenses-other	25,000	9,000	6,000	10,000
Total administrative expenses	289,300	98,000	82,400	108,900
Total operating expenses	903,750	304,500	261,000	338,250
Net operating income (loss)	$ 146,250	$ 82,500	$ (28,000)	$ 96,750
Additional Data:
Manager's salary per quarter	$ 18,000
New employee's salary per month	$ 5,000
Employment tax as a percentage of salaries	12%
Delivery person's salary per quarter	$ 7,000
Insurance related to downtown fixtures	1/3
Discharged employee's salary per quarter	$ 8,000
Assumed sales transferred to Uptown store	$ 200,000
Uptown store gross margin percentage	43%

Management is very concerned about the Downtown stores inability to show a profit, and consideration is being given to closing the store. The company has asked you to make a recommendation as to what course of action should be taken. The following additional information is available about the store:

The manager of the store has been with the company for many years, he would be retained and transferred to another position in the company if the store were closed. His salary is $6,000 per month, or $18,000 per quarter. If the store were not closed, a new employee would be hired to fill the other position at a salary of $5,000 per month.

The lease on the building housing the Downtown Store can be broken with no penalty.

The fixtures being used in the Downtown Store would be transferred to the other two stores if the Downtown Store were closed.

The companys employment taxes are 12% of salaries.

A single delivery crew serves all three stores. One delivery person could be discharged if the Downtown Store were closed; this persons salary amounts to $7,000 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but it does eventually become obsolete.

One-third of the Downtown Stores insurance relates to its fixtures.

The general office salaries and other expenses relate to the general management of Style, Inc. The employee in the general office who is responsible for the Downtown Store would be discharged if the store were closed. This employees compensation is $8,000 per quarter.

Required (USE EXCEL):

1 Prepare a schedule showing the change in revenues and expenses and the impact on the overall company net operating income that would result if the Downtown Store were closed.

2 Based on your computations in (1) above, what recommendation would you make to the management of Style, Inc.?

3 Assume that if the Downtown Store were closed, sales in the Uptown Store would increase by $200,000 per quarter due to loyal customers shifting their buying to the Uptown Store. The Uptown Store has ample capacity to handle the increased sales, and its grow margin is 43% of sales. What effect would these factors have on your recommendation concerning the Downtown Store? Show computations in Excel.

Please answer in following format:

Enter your information in the yellow boxes.
Note: You will have to add the formula.
Style, INC.
Schedule
Gross margin lost if the store is closed		$ 228,000
Less Costs that can be avoided:
Direct advertising	36,000
Sales salaries	45,000
Delivery salaries	7,000
Store rent	60,000
Store management salaries	15,000
General office salaries	8,000
Utilities	27,200
Insurance on inventories	6,000
Employment taxes*	9,000	213,200
Decrease in company net operating income
if the Downtown Store is closed		$ 14,800
*Salaries avoided by closing the store:
Sales salaries	45000
Delivery salaries	7,000
Store management salaries	15,000
General office salaries	8,000
Total salaries	75,000
Employment tax rate	0.12
Employment taxes avoided	9,000
Computations
Gross margin lost if the Downtown Store is closed		$ 228,000
Gross margin gained at the Uptown Store		86,000
Net loss in gross margin		142,000
Costs that can be avoided if Downtown Store is closed		75,000
Net advantage of closing the Downtown Store		$ 67,000