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 $ 4,500,000 $ 900,000 $ 1,800,000 $ 1,800,000 Cost of goods sold 2,475,000 550,000 935,000 990,000 Gross margin 2,025,000 350,000 865,000 810,000 Selling and administrative expenses Selling expenses 847,000 246,400 322,500 278,100 Administrative expenses 458,000 121,000 173,400 163,600 Total expenses 1,305,000 367,400 495,900 441,700 Net operating income (loss) $ 720,000 $ (17,400 ) $ 369,100 $ 368,300 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 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 $ 237,000 $ 63,800 $ 71,000 $ 102,200 Direct advertising 180,000 66,000 87,000 27,000 General advertising 67,500 13,500 27,000 27,000 Store rent 300,000 84,000 117,000 99,000 Depreciation of store fixtures 23,500 6,100 7,500 9,900 Delivery salaries 25,500 8,500 8,500 8,500 Depreciation of delivery equipment 13,500 4,500 4,500 4,500 Total selling expenses $ 847,000 $ 246,400 $ 322,500 $ 278,100 Allocated on the basis of sales dollars Total North Store South Store East Store Administrative expenses Store managers' salaries $ 92,500 $ 28,500 $ 37,500 $ 26,500 General office salaries 67,500 14,000 27,000 26,500 Insurance on fixtures and inventory 40,000 12,000 16,500 11,500 Utilities 82,125 26,780 25,800 29,545 Employment taxes 63,375 17,220 21,600 24,555 General officeother 112,500 22,500 45,000 45,000 Total administrative expenses $ 458,000 $ 121,000 $ 173,400 $ 163,600 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 Store were closed She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $13,000 per quarter The general manager of the North Store would continue to earn her normal salary of $14,000 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 $5,500 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 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 $7,000 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	$	4,500,000	$	900,000		$	1,800,000	$	1,800,000
Cost of goods sold		2,475,000		550,000			935,000		990,000
Gross margin		2,025,000		350,000			865,000		810,000
Selling and administrative expenses:
Selling expenses		847,000		246,400			322,500		278,100
Administrative expenses		458,000		121,000			173,400		163,600
Total expenses		1,305,000		367,400			495,900		441,700
Net operating income (loss)	$	720,000	$	(17,400	)	$	369,100	$	368,300

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:

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	$	237,000	$	63,800	$	71,000	$	102,200
Direct advertising		180,000		66,000		87,000		27,000
General advertising*		67,500		13,500		27,000		27,000
Store rent		300,000		84,000		117,000		99,000
Depreciation of store fixtures		23,500		6,100		7,500		9,900
Delivery salaries		25,500		8,500		8,500		8,500
Depreciation of delivery equipment		13,500		4,500		4,500		4,500
Total selling expenses	$	847,000	$	246,400	$	322,500	$	278,100

*Allocated on the basis of sales dollars.

	Total		North Store		South Store		East Store
Administrative expenses:
Store managers' salaries	$	92,500	$	28,500	$	37,500	$	26,500
General office salaries*		67,500		14,000		27,000		26,500
Insurance on fixtures and inventory		40,000		12,000		16,500		11,500
Utilities		82,125		26,780		25,800		29,545
Employment taxes		63,375		17,220		21,600		24,555
General officeother*		112,500		22,500		45,000		45,000
Total administrative expenses	$	458,000	$	121,000	$	173,400	$	163,600

*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 Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $13,000 per quarter. The general manager of the North Store would continue to earn her normal salary of $14,000 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 $5,500 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.
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 $7,000 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?