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 $ 3,700,000 $ 800,000 $ 1,480,000 $ 1,420,000 Cost of goods sold 2,035,000 460,000 794,000 781,000 Gross margin 1,665,000 340,000 686,000 639,000 Selling and administrative expenses Selling expenses 831,000 238,400 318,500 274,100 Administrative expenses 418,000 113,000 161,400 143,600 Total expenses 1,249,000 351,400 479,900 417,700 Net operating income (loss) $ 416,000 $ (11,400 ) $ 206,100 $ 221,300 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 $ 214,800 $ 59,700 $ 72,200 $ 82,900 Direct advertising 172,000 58,000 79,000 35,000 General advertising 55,500 12,000 22,200 21,300 Store rent 335,000 92,000 127,000 116,000 Depreciation of store fixtures 19,500 5,300 6,700 7,500 Delivery salaries 23,100 7,700 7,700 7,700 Depreciation of delivery equipment 11,100 3,700 3,700 3,700 Total selling expenses $ 831,000 $ 238,400 $ 318,500 $ 274,100 Allocated on the basis of sales dollars Total North Store South Store East Store Administrative expenses Store managers' salaries $ 80,500 $ 24,500 $ 33,500 $ 22,500 General office salaries 55,500 12,000 22,200 21,300 Insurance on fixtures and inventory 32,000 9,600 12,500 9,900 Utilities 101,415 31,315 35,860 34,240 Employment taxes 56,085 15,585 20,340 20,160 General officeother 92,500 20,000 37,000 35,500 Total administrative expenses $ 418,000 $ 113,000 $ 161,400 $ 143,600 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 $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 $4,700 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 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	$	3,700,000	$	800,000		$	1,480,000	$	1,420,000
Cost of goods sold		2,035,000		460,000			794,000		781,000
Gross margin		1,665,000		340,000			686,000		639,000
Selling and administrative expenses:
Selling expenses		831,000		238,400			318,500		274,100
Administrative expenses		418,000		113,000			161,400		143,600
Total expenses		1,249,000		351,400			479,900		417,700
Net operating income (loss)	$	416,000	$	(11,400	)	$	206,100	$	221,300

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	$	214,800	$	59,700	$	72,200	$	82,900
Direct advertising		172,000		58,000		79,000		35,000
General advertising*		55,500		12,000		22,200		21,300
Store rent		335,000		92,000		127,000		116,000
Depreciation of store fixtures		19,500		5,300		6,700		7,500
Delivery salaries		23,100		7,700		7,700		7,700
Depreciation of delivery equipment		11,100		3,700		3,700		3,700
Total selling expenses	$	831,000	$	238,400	$	318,500	$	274,100

*Allocated on the basis of sales dollars.

	Total		North Store		South Store		East Store
Administrative expenses:
Store managers' salaries	$	80,500	$	24,500	$	33,500	$	22,500
General office salaries*		55,500		12,000		22,200		21,300
Insurance on fixtures and inventory		32,000		9,600		12,500		9,900
Utilities		101,415		31,315		35,860		34,240
Employment taxes		56,085		15,585		20,340		20,160
General officeother*		92,500		20,000		37,000		35,500
Total administrative expenses	$	418,000	$	113,000	$	161,400	$	143,600

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 $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 $4,700 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.
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?