Superior Markets, inc, operates three stores in a large metropolitan area. A segmented absorption costing income company for the last quarter is given below Superior Markets, Inc. Income Statement For the Quarter Ended September 30 North store South store East Store Total Sales Cost of goods sold Gross margin Selling and administrative expenses i $4,800,000 $960,000 $1,920,000 $1,920,000 2,640,000 600,000 984,000 1,056,000 936,000 2,160,000 360,000 864,000 Selling expenses Administrative expenses 853,000 249,400324,000 177, 900 01,900 279,600 171,100 450,700 413,300 473,000 124,000 1,326,000 373,400 Total expenses Net operating income (loss) -m, aoo-s(1,400) $434-100-$ 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 stdre should be closed or kept open. The following additional information is available for your use: 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 that are shown above is as follows: North Store South store East Store Selling expenses $246,200 59,00077,800 $109,400 69,00090,000 24,000 72,000 14,400 28,800 28,800 106,00093,000 ,80010,800 Sales salariers Direct advertising General advertising Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery 183,000 286,000 87,000 25,000 26,400 6,400 ,800 8,800 8,800 4,800 . 4,0004,800 14,400 equipment $853,000 249,400 324,000 $279,600 Total selling expenses 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 to stores if the North Store were dosed 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 $13,400 per quarter. The general manager of the North Store would continue to earn her normal salary of $14,400 per quarter. All other managers and employees in the North 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 Book closed. This person's salary is $5.800 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 rences The company pays employment taxes equal to 15% of their employees' salaries g. One-third of the insurance in the North Store is on the store's fixtures h. The "General office salaries" and "General office-other 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 person's compensation is $7.200 per quarter Required: 1. Ho 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 w much employee salaries will the company avoid ifit closes the North Store? Store's floor space can't be subleased, would you recommend closing the North Store? ssume that the North Store's floor space can't be subleased. However, let's introduce three more as 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 present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store? sumptions. First, assume that if East Store would yield the same gross margin as a percentage of sales as 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 stor d. The general manager of the North Store would be retained and transferred to another position in the company if the es if the North Store were closed. North Store of $13,400 per points d be filling a position that would otherwise be filled by hiring a new employee at a salary were closed. She woul quarter. The general manager of the North Store would continue to earn her normal salary of $14,400 per quarter. All other managers and employees in the North store would be discharged tores. One delivery person could be discharged if the North Store were e. The company has one delivery crew that serves all three s closed. This person's salary is $5,800 per quarter. The delivery equipment would be distributed to does not wear out through use, but does eventually become obsolete. t The company pays employmemt taxes equal to 15% of their employees' salaries. 9. h. The "General office salaries" and "General office-other relate to the erence, One-third of the insurance in the North Store is on the store's fixtures 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 person's compensation is $7,200 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 can't be subleased, would you recommend closing the North Store? 5. Assume that the North Store's floor space can't be subleased. However, lot'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 loyality 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? Superior Markets, inc, operates three stores in a large metropolitan area. A segmented absorption costing income company for the last quarter is given below Superior Markets, Inc. Income Statement For the Quarter Ended September 30 North store South store East Store Total Sales Cost of goods sold Gross margin Selling and administrative expenses i $4,800,000 $960,000 $1,920,000 $1,920,000 2,640,000 600,000 984,000 1,056,000 936,000 2,160,000 360,000 864,000 Selling expenses Administrative expenses 853,000 249,400324,000 177, 900 01,900 279,600 171,100 450,700 413,300 473,000 124,000 1,326,000 373,400 Total expenses Net operating income (loss) -m, aoo-s(1,400) $434-100-$ 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 stdre should be closed or kept open. The following additional information is available for your use: 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 that are shown above is as follows: North Store South store East Store Selling expenses $246,200 59,00077,800 $109,400 69,00090,000 24,000 72,000 14,400 28,800 28,800 106,00093,000 ,80010,800 Sales salariers Direct advertising General advertising Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery 183,000 286,000 87,000 25,000 26,400 6,400 ,800 8,800 8,800 4,800 . 4,0004,800 14,400 equipment $853,000 249,400 324,000 $279,600 Total selling expenses 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 to stores if the North Store were dosed 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 $13,400 per quarter. The general manager of the North Store would continue to earn her normal salary of $14,400 per quarter. All other managers and employees in the North 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 Book closed. This person's salary is $5.800 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 rences The company pays employment taxes equal to 15% of their employees' salaries g. One-third of the insurance in the North Store is on the store's fixtures h. The "General office salaries" and "General office-other 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 person's compensation is $7.200 per quarter Required: 1. Ho 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 w much employee salaries will the company avoid ifit closes the North Store? Store's floor space can't be subleased, would you recommend closing the North Store? ssume that the North Store's floor space can't be subleased. However, let's introduce three more as 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 present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store? sumptions. First, assume that if East Store would yield the same gross margin as a percentage of sales as 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 stor d. The general manager of the North Store would be retained and transferred to another position in the company if the es if the North Store were closed. North Store of $13,400 per points d be filling a position that would otherwise be filled by hiring a new employee at a salary were closed. She woul quarter. The general manager of the North Store would continue to earn her normal salary of $14,400 per quarter. All other managers and employees in the North store would be discharged tores. One delivery person could be discharged if the North Store were e. The company has one delivery crew that serves all three s closed. This person's salary is $5,800 per quarter. The delivery equipment would be distributed to does not wear out through use, but does eventually become obsolete. t The company pays employmemt taxes equal to 15% of their employees' salaries. 9. h. The "General office salaries" and "General office-other relate to the erence, One-third of the insurance in the North Store is on the store's fixtures 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 person's compensation is $7,200 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 can't be subleased, would you recommend closing the North Store? 5. Assume that the North Store's floor space can't be subleased. However, lot'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 loyality 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