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 $ 4,200,000 $ 1,008,000 $ 1,680,000 $ 1,512,000 Cost of goods sold 2,320,080 564,480 924,000 831,600 Gross margin 1,879,920 443,520 756,000 680,400 Selling and administrative expenses Selling expenses 1,143,800 323,960 441,000 378,840 Administrative expenses 536,200 148,400 211,260 176,540 Total expenses 1,680,000 472,360 652,260 555,380 Net operating income (loss) $ 199,920 $ (28,840 ) $ 103,740 $ 125,020 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 $ 334,600 $ 98,000 $ 124,600 $ 112,000 Direct advertising 261,800 71,400 100,800 89,600 General advertising 63,000 15,120 25,200 22,680 Store rent 420,000 119,000 168,000 133,000 Depreciation of store fixtures 22,400 6,440 8,400 7,560 Delivery salaries 29,400 9,800 9,800 9,800 Depreciation of delivery equipment 12,600 4,200 4,200 4,200 Total selling expenses $ 1,143,800 $ 323,960 $ 441,000 $ 378,840 Allocated on the basis of sales dollars Total North Store South Store East Store Administrative expenses Store managers' salaries $ 98,000 $ 29,400 $ 42,000 $ 26,600 General office salaries 70,000 16,800 28,000 25,200 Insurance on fixtures and inventory 35,000 10,500 12,600 11,900 Utilities 148,400 43,400 56,000 49,000 Employment taxes 79,800 23,100 30,660 26,040 General officeother 105,000 25,200 42,000 37,800 Total administrative expenses $ 536,200 $ 148,400 $ 211,260 $ 176,540 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 Store were closed She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $15,400 per quarter The general manager of the North Store would continue to earn her normal salary of $16,800 per quarter All other managers and employees in the North store would be discharged 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 $5,600 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 The company pays employment taxes equal to 15 of their employees' salaries One third of the insurance in the North Store is on the stores fixtures 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 $8,400 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

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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

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	$	4,200,000	$	1,008,000		$	1,680,000	$	1,512,000
Cost of goods sold		2,320,080		564,480			924,000		831,600
Gross margin		1,879,920		443,520			756,000		680,400
Selling and administrative expenses:
Selling expenses		1,143,800		323,960			441,000		378,840
Administrative expenses		536,200		148,400			211,260		176,540
Total expenses		1,680,000		472,360			652,260		555,380
Net operating income (loss)	$	199,920	$	(28,840	)	$	103,740	$	125,020

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	$	334,600	$	98,000	$	124,600	$	112,000
Direct advertising		261,800		71,400		100,800		89,600
General advertising*		63,000		15,120		25,200		22,680
Store rent		420,000		119,000		168,000		133,000
Depreciation of store fixtures		22,400		6,440		8,400		7,560
Delivery salaries		29,400		9,800		9,800		9,800
Depreciation of delivery equipment		12,600		4,200		4,200		4,200
Total selling expenses	$	1,143,800	$	323,960	$	441,000	$	378,840

*Allocated on the basis of sales dollars.

	Total		North Store		South Store		East Store
Administrative expenses:
Store managers' salaries	$	98,000	$	29,400	$	42,000	$	26,600
General office salaries*		70,000		16,800		28,000		25,200
Insurance on fixtures and inventory		35,000		10,500		12,600		11,900
Utilities		148,400		43,400		56,000		49,000
Employment taxes		79,800		23,100		30,660		26,040
General officeother*		105,000		25,200		42,000		37,800
Total administrative expenses	$	536,200	$	148,400	$	211,260	$	176,540

*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 Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $15,400 per quarter. The general manager of the North Store would continue to earn her normal salary of $16,800 per quarter. All other managers and employees in the North store would be discharged.
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 $5,600 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.
The company pays employment taxes equal to 15% of their employees' salaries.
One-third of the insurance in the North Store is on the stores fixtures.
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 $8,400 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?