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 $ 4,400,000 $ 880,000 $ 1,760,000 $ 1,760,000 Cost of goods sold 2,420,000 525,000 927,000 968,000 Gross margin 1,980,000 355,000 833,000 792,000 Selling and administrative expenses Selling expenses 845,000 245,400 322,000 277,600 Administrative expenses 453,000 120,000 171,900 161,100 Total expenses 1,298,000 365,400 493,900 438,700 Net operating income (loss) $ 682,000 $ (10,400 ) $ 339,100 $ 353,300 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 $ 243,600 $ 65,400 $ 73,400 $ 104,800 Direct advertising 179,000 65,000 86,000 28,000 General advertising 66,000 13,200 26,400 26,400 Store rent 295,000 83,000 116,000 96,000 Depreciation of store fixtures 23,000 6,000 7,400 9,600 Delivery salaries 25,200 8,400 8,400 8,400 Depreciation of delivery equipment 13,200 4,400 4,400 4,400 Total selling expenses $ 845,000 $ 245,400 $ 322,000 $ 277,600 Allocated on the basis of sales dollars Total North Store South Store East Store Administrative expenses Store managers' salaries $ 91,000 $ 28,000 $ 37,000 $ 26,000 General office salaries 66,000 13,200 26,400 26,400 Insurance on fixtures and inventory 39,000 11,700 16,000 11,300 Utilities 83,130 27,850 26,720 28,560 Employment taxes 63,870 17,250 21,780 24,840 General officeother 110,000 22,000 44,000 44,000 Total administrative expenses $ 453,000 $ 120,000 $ 171,900 $ 161,100 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 $12,200 per quarter The general manager of the North Store would continue to earn her normal salary of $13,200 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 $5,400 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 $6,600 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	$	4,400,000	$	880,000		$	1,760,000	$	1,760,000
Cost of goods sold		2,420,000		525,000			927,000		968,000
Gross margin		1,980,000		355,000			833,000		792,000
Selling and administrative expenses:
Selling expenses		845,000		245,400			322,000		277,600
Administrative expenses		453,000		120,000			171,900		161,100
Total expenses		1,298,000		365,400			493,900		438,700
Net operating income (loss)	$	682,000	$	(10,400	)	$	339,100	$	353,300

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	$	243,600	$	65,400	$	73,400	$	104,800
Direct advertising		179,000		65,000		86,000		28,000
General advertising*		66,000		13,200		26,400		26,400
Store rent		295,000		83,000		116,000		96,000
Depreciation of store fixtures		23,000		6,000		7,400		9,600
Delivery salaries		25,200		8,400		8,400		8,400
Depreciation of delivery equipment		13,200		4,400		4,400		4,400
Total selling expenses	$	845,000	$	245,400	$	322,000	$	277,600

*Allocated on the basis of sales dollars.

	Total		North Store		South Store		East Store
Administrative expenses:
Store managers' salaries	$	91,000	$	28,000	$	37,000	$	26,000
General office salaries*		66,000		13,200		26,400		26,400
Insurance on fixtures and inventory		39,000		11,700		16,000		11,300
Utilities		83,130		27,850		26,720		28,560
Employment taxes		63,870		17,250		21,780		24,840
General officeother*		110,000		22,000		44,000		44,000
Total administrative expenses	$	453,000	$	120,000	$	171,900	$	161,100

*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 $12,200 per quarter. The general manager of the North Store would continue to earn her normal salary of $13,200 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 $5,400 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 $6,600 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?