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 $ 3,600,000 $ 800,000 $ 1,440,000 $ 1,360,000 Cost of goods sold 1,980,000 470,000 762,000 748,000 Gross margin 1,620,000 330,000 678,000 612,000 Selling and administrative expenses Selling expenses 829,000 237,400 318,000 273,600 Administrative expenses 413,000 112,000 159,900 141,100 Total expenses 1,242,000 349,400 477,900 414,700 Net operating income (loss) $ 378,000 $ (19,400 ) $ 200,100 $ 197,300 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 $ 221,400 $ 61,000 $ 74,600 $ 85,800 Direct advertising 171,000 57,000 78,000 36,000 General advertising 54,000 12,000 21,600 20,400 Store rent 330,000 91,000 126,000 113,000 Depreciation of store fixtures 19,000 5,200 6,600 7,200 Delivery salaries 22,800 7,600 7,600 7,600 Depreciation of delivery equipment 10,800 3,600 3,600 3,600 Total selling expenses $ 829,000 $ 237,400 $ 318,000 $ 273,600 Allocated on the basis of sales dollars Total North Store South Store East Store Administrative expenses Store managers' salaries $ 79,000 $ 24,000 $ 33,000 $ 22,000 General office salaries 54,000 12,000 21,600 20,400 Insurance on fixtures and inventory 31,000 9,300 12,000 9,700 Utilities 102,420 31,010 36,780 34,630 Employment taxes 56,580 15,690 20,520 20,370 General officeother 90,000 20,000 36,000 34,000 Total administrative expenses $ 413,000 $ 112,000 $ 159,900 $ 141,100 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 $11,000 per quarter The general manager of the North Store would continue to earn her normal salary of $12,000 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 $4,600 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 $6,000 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	$	3,600,000	$	800,000		$	1,440,000	$	1,360,000
Cost of goods sold		1,980,000		470,000			762,000		748,000
Gross margin		1,620,000		330,000			678,000		612,000
Selling and administrative expenses:
Selling expenses		829,000		237,400			318,000		273,600
Administrative expenses		413,000		112,000			159,900		141,100
Total expenses		1,242,000		349,400			477,900		414,700
Net operating income (loss)	$	378,000	$	(19,400	)	$	200,100	$	197,300

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	$	221,400	$	61,000	$	74,600	$	85,800
Direct advertising		171,000		57,000		78,000		36,000
General advertising*		54,000		12,000		21,600		20,400
Store rent		330,000		91,000		126,000		113,000
Depreciation of store fixtures		19,000		5,200		6,600		7,200
Delivery salaries		22,800		7,600		7,600		7,600
Depreciation of delivery equipment		10,800		3,600		3,600		3,600
Total selling expenses	$	829,000	$	237,400	$	318,000	$	273,600

*Allocated on the basis of sales dollars.

	Total		North Store		South Store		East Store
Administrative expenses:
Store managers' salaries	$	79,000	$	24,000	$	33,000	$	22,000
General office salaries*		54,000		12,000		21,600		20,400
Insurance on fixtures and inventory		31,000		9,300		12,000		9,700
Utilities		102,420		31,010		36,780		34,630
Employment taxes		56,580		15,690		20,520		20,370
General officeother*		90,000		20,000		36,000		34,000
Total administrative expenses	$	413,000	$	112,000	$	159,900	$	141,100

*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 $11,000 per quarter. The general manager of the North Store would continue to earn her normal salary of $12,000 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 $4,600 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 $6,000 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?