Superior Markets, Inc., 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, Inc. Income Statement For the Quarter Ended September 30

	Total	North Store	South Store	East Store
Sales	$3,700,000	$800,000	$1,480,000	$1,420,000
COGS	2,035,000	460,000	794,000	781,000
Gross Margin	1,665,000	340,000	686,000	639,000
Selling and Admin expenses
Selling expenses	831,000	238,400	318,500	274,100
Admin Expenses	418,000	113,000	161,400	143,600
Total Expenses	1,249,000	351,400	479,900	417,700
Net Operating Income	416,000	(11,400)	206,100	221,300

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:

The breakdown of the selling and administrative expenses that are shown above is as follows:

	Total	North Store	South Store	East Store
Selling Expenses
Sales Salaries	$214,800	$59,700	$72,200	$82,900
Direct Advertising	172,000	58,000	79,000	35,000
General Advertising*	55,500	12,000	22,200	21,300
Store rent	335,000	92,000	127,000	116,000
Depreciation of Store Fixtures	19,500	5,300	6,700	7,500
Delivery Salaries	23,100	7,700	7,700	7,700
Depreciation of delivery equipment	11,100	3,700	3,700	3,700
Total Selling Expense	831,000	238,400	318,500	274,100

*Allocated on the basis of Sales Dollars

	Total	North Store	South Store	East Store
Admin Expenses
Store managers' salaries	80,500	24,500	33,500	22,500
General office salaries*	55,500	12,000	22,200	21,300
Insurance on fixtures and inventory	32,000	9,600	12,500	9,900
Utilities	101,415	31,315	35,860	34,240
Employment taxes	56,085	15,585	20,340	20,160
General officeother*	92,500	20,000	37,000	35,500
Total administrative expenses	418,000	113,000	161,400	143,600

*Allocated on the basis of sales dollars.

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 $11,000 per quarter. The general manager of the North Store would continue to earn her normal salary of $12,000 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 persons salary is $4,700 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 stores fixtures.

h. The General office salaries and General officeother relate to the overall management of Superior Markets, Inc. If the North Store were closed, one person in the general office could be discharged because of the decrease in overall workload. This persons compensation is $6,000 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 cant be subleased, would you recommend closing the North Store?

5. Assume that the North Store's floor space cant 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?