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 North South Total Store Store Sales $3,900,000 $ 820,000 $1,560,000 Cost of goods sold 2, 145,000 480,000 829,000 Gross margin 1,755,000 340,000 731,000 Selling and administrative expenses: Selling expenses 835,000 240,400 319,500 Administrative expenses 428,000 115,000 164,400 Total expenses 1,263,000 355,400 483,900 Net operating income (loss) 492,000 $(15,400) $ 247,100 East Store $1,520,000 836,000 684,000 275, 100 148,600 423,700 260,300 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: a. The breakdown of the selling and administrative expenses that are shown above is as follows: North Store South Store East Store Total 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: a. 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 Direct advertising General advertising Store rent Depreciation of re fixtures Delivery salaries Depreciation of delivery equipment Total selling expenses $241,600 174,000 58,500 305,000 20,500 23,700 11,700 $ 56,800 60,000 12,300 94,000 5,500 7,900 3,900 $ 85,400 81,000 23,400 111,000 6,900 7,900 3,900 $ 99,400 33,000 22,800 100,000 8,100 7,980 3,900 $835,000 $ 240,400 $319,500 $275,100 *Allocated on the basis of sales dollars. North Store South Store East Store Total Administrative expenses: Store managers' salaries General office salaries Insurance on fixtures and inventory Utilities Employment axes General office-other Total administrative expenses $ 83,500 58,500 34 000 93,405 61,095 97,500 $ 428,000 $ 25,500 12,300 10,200 31,125 15,375 20.500 $115,000 $ 34,500 23,400 13,500 31,320 22,680 39,000 $164,400 $ 23,500 22,800 10,300 30,960 23,840 38,002 $ 148, 680 General office salaries* Insurance on fixtures and inventory Utilities Employment taxes General office other Total administrative expenses 58,500 34,000 93,405 61,095 97,500 $428,000 12,300 10, 200 31,125 15,375 20,500 $115,000 23,400 13,500 31,320 22, 680 39,000 $164,400 22,800 10,300 30,960 23,940 38,000 $ 148,600 "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 $11,300 per quarter. The general manager of the North Store would continue to earn her normal salary of $12,300 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 person's salary is $4,900 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. 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 $6,150 per quarter. Required: 1. How much employee salaries will the company avoid if it closes the North Stor 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 * North Cornwa manfolita ------------ CA Anna latinae 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 How much employee salaries will the company avoid if it closes the North Store? Employee salaries Required 2 > 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 recomm 5. Assume that the North Store's floor space can't be subleased. However, let's introd the North Store were closed, one-fourth of its sales would transfer to the East Store, d Markets. Second, assume that the East Store has enough capacity to handle the incre North Store. Third, assume that the increased sales in the East Store would yield the sa present sales in the East store. Given these new assumptions, what is the financial adv Store? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required How much employment taxes will the company avoid if it doses the North Store? Employment taxes $ 13.860 Required: 1. How much employee salaries will the company avoid if it closes the North Sto 2. How much employment taxes will the company avoid if it closes the North Sto 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 re 5. Assume that the North Store's floor space can't be subleased. However, let's i the North Store were closed, one-fourth of its sales would transfer to the East St Markets. Second, assume that the East Store has enough capacity to handle the North Store. Third, assume that the increased sales in the East Store would yield present sales in the East store. Given these new assumptions, what is the financi Store? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 What is the financial advantage (disadvantage) of closing the North Store? (Enter an Financial advantage (disadvantage) (41.930