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, IN Income Statement For the Quarter Ended September 30 North South East Total Store Store Store Sales 34,400.000 $80,000 $1,760,000 51,760,000 Cost of goods sold 2,420,00 525, 927, cee 968,000 Gross margin 1960 355,000 83,000 92.000 Selling and adhinistrative expenses Selling PL 845,000 245,400 322,000 277,600 Administrative expenses 153,000 120,000 171.900 161,100 Total penses 1,290,000 365.400 493,900 438,700 Net operating Incone (loss) 5682,000 5110,400 $ 339,100 $353,300 The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to dosing the store. The company has asked you to make a recommendation as to whether the store should be close 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: 26.400 Selling expenses Sales salaries Direct advertising General advertising Store rent Depreciation of store Fixtures Delivery salaries Depreciation of delivery equipment Total selling expenses North South East Total Store Store Store $243,66 65,400 $ 73,400 $184,800 179.000 65,000 86,000 28.000 66,00 13,200 26,400 295,000 83,000 116,000 96.000 23.000 6.000 7,400 9.600 25,200 8.400 8.400 13,200 4,49 4.400 5645,000 $245,400 5322,000 $277,600 & 7 00 + . 9 O w E 20 Y U 0 P S D F G H J L 2 C V M . 26 mlocated 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. North South East Total Store Store Store $ 91,000 $28,000 $ 37,000 $ 26,000 66,000 13, 200 26,400 26,400 39,000 11,700 16,000 11,300 83, 130 27,850 26,720 28,560 63,870 17,250 21,780 24,840 110,000 22,000 44,000 44,000 5453,000 $120,000 $171,900 $161,100 . The lease on the building housing the North Store can be broken with no penalty The fixtures being used in the North Store would be transferred to the other two stores if the North Store were closed. 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 $12,200 per quarter. The general manager of the North Store would continue to earn her normal salary of $13,200 per quarter. All other managers and employees in the North store would be discharged e. The company has one dellvery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person's salary is $5,400 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. t. The company pays employment taxes equal to 15% of their employees' salaries 9. One-third of the insurance in the North Store is on the store's fixtures. h. The "General office salaries and General office-other" 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 person's compensation is $6,600 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 avold 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 sublessed, would you recommend closing the North Store? A that the leith Canh URIA I Intendin the mention Centen the 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