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

$

4,700,000

$

940,000

$

1,880,000

$

1,880,000

Cost of goods sold

2,585,000

580,000

971,000

1,034,000

Gross margin

2,115,000

360,000

909,000

846,000

Selling and administrative expenses:

Selling expenses:

851,000

248,400

323,500

279,100

Administrative expenses

468,000

123,000

176,400

168,600

Total expenses

1,319,000

371,400

499,900

447,700

Net operating income (loss)

$

796,000

$

(11,400

)

$

409,100

$

398,300

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 is as follows:

Total

North Store

South Store

East Store

Selling expenses:

Sales salaries

$

252,800

$

60,600

$

80,200

$

112,000

Direct advertising

182,000

68,000

89,000

25,000

General advertising*

70,500

14,100

28,200

28,200

Store rent

281,000

86,000

105,000

90,000

Depreciation of store fixtures

24,500

6,300

7,700

10,500

Delivery salaries

26,100

8,700

8,700

8,700

Depreciation of delivery equipment

14,100

4,700

4,700

4,700

Total selling expenses

$

851,000

$

248,400

$

323,500

$

279,100

*Allocated on the basis of sales dollars.

	Total		North Store		South Store		East Store
Administrative expenses:
Store management salaries	$	95,500	$	29,500	$	38,500	$	27,500
General office salaries*		70,500		14,200		28,200		28,100
Insurance on fixtures and inventory		42,000		12,600		17,500		11,900
Utilities		75,765		26,250		21,860		27,655
Employment taxes		66,735		16,950		23,340		26,445
General office other*		117,500		23,500		47,000		47,000
Total administrative expenses	$	468,000	$	123,000	$	176,400	$	168,600
*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 $13,200 per quarter. The general manager of the North Store would be retained at her normal salary of $14,200 per quarter. All other employees in the 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 $5,700 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 companys employment taxes are 15% of 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 $7,100 per quarter.

Required: 1. Prepare a schedule showing the change in revenues and expenses and the impact on the company's overall net operating income that would result if the North Store were closed. (Any lossesl reductions should be indicated by a minus sign.) Gross margin lost if the store is closed Store rent Sales salaries Delivery salaries Insurance on inventories Employment taxes Direct advertising Utlities Store management salaries Salary of new manager Total costs that can be avoided Decrease in company profits if the North Store is closed