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 Septel'ber 36 North South East Total Store Store Store Sales- 53,568,666 $788,666 $1,468,660 $1,328,666 Cost of goods sold 1,925,666 459,666 749,660 726,666 Gross margin 1,575,666 336,666 551,666 594,666 Selling and administrative expenses: Selling expenses 827,666 236,466 317,566 273,166 Administrative expenses 463,666 111,666 153,466 133,666 Total expenses 1,235,666 347,466 475,966 411,766 Net operating income (loss) $ 346,666 $(17,46I6] 5 175,166 5 182,366 I'he North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing :he store. The company has asked you to make a recommendation as to whether the store should be closed or kept open. The iollowing additional information is available for your use: a. The breakdown ofthe selling and administrative expenses that are shown above is as follows: North South East Total Store Store Store Selling expenses: Sales salaries $ 228, 000 $ 62,600 $ 77,900 $ 88, 400 Direct advertising 170, 000 56,900 77, 000 37, 000 General advertising* 52,500 11, 700 21, 900 19, 800 Store rent 325,000 90, 000 125, 000 110, 000 Depreciation of store fixtures 18, 500 5, 100 6,500 6,900 Delivery salaries 22,500 7,500 7,500 7,500 Depreciation of delivery equipment 10, 500 3,500 3,500 3,500 Total selling expenses $827,000 $ 236, 400 $ 317, 500 $ 273, 100 Allocated on the basis of sales dollars. North South East Total Store Store Store Administrative expenses: Store managers' salaries $ 77,500 $ 23,500 $ 32,500 $ 21,500 General office salaries* 52,500 11, 700 21, 000 19, 800 Insurance on fixtures and inventory 30, 000 9,000 11, 500 9,500 Utilities 103, 425 31, 505 37,700 34, 220 Employment taxes 57, 075 15,795 20,700 20,580 General office-other* 87,500 19,500 35,000 33, 900 Total administrative expenses $408, 900 $111, 000 $ 158, 400 $138, 600 Allocated on the basis of sales dollars. 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 Stored. 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 lling a position that would otherwise be lled by hiring a new employee at a salary of $10,700 per quarter. The general manager of the North Store would continue to earn her normal salary of $11,700 per quarter. All other managers and employees in the North store would be discharged. e. "he 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 $4,500 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. "he company pays employment taxes equal to 15% of their employees' salaries. g. Onethird of the insurance in the North Store is on the store's xtures. h. The \"General ofce salaries\" and \"General officeother" relate to the overall management of Superior Markets, Inc. Ifthe North Store were closed, one person in the general office could be discharged because ofthe decrease in overall workload. This person's compensation is $5,850 per quarter. Required: |. 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 :he North Store were closed, onefourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior IMarkets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from closing the 'lorth Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as Dresent sales in the East store. Given these new assumptions, what is the financial advantage {disadvantage} of closing the North Store