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 North South East Total Store Store Store Sales $4,200,000 $1,000,000 $1,680,000 $1,512,00 Cost of soods sold 2,320.00 564,400 924,000 821,600 Gross margin 1,879,920 441, 120 256 60,400 Selling and administrative expenses Selling expenses 1,143,800 323,960 441,000 378,840 Administrative expenses 536,200 148.000 211260 176,540 Total expenses 1.680.000 492,360 652,260 Net operating income oss $ 199,920 (28,140) 3 103,740 125,020 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: Selling expenses : Sales salaries Direct advertising General advertising Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery equipment Total selling expenses North South East Total Store Store Store $ 334,600 $ 98,000 $124,600 $112,000 261,800 71,400 100,800 89,600 63,000 15,120 25,200 22,680 420,000 119,000 168,000 133,000 22,400 6,440 8,400 7,560 29,400 9,800 9,800 9,808 12,600 4,200 4,200 4,200 $1,143,800 $323,960 $441,000 $378,840 *Allocated on the basis of sales dollars. Total North Store Administrative expenses: Store managers' salaries General office salaries Insurance on fixtures and inventory Utilities Employment taxes General office other Total administrative expenses $ 98,000 $ 29,400 70,000 16,800 35,000 10,500 148, 480 43,400 79,800 23, 100 105,000 25,200 $536,200 $148, 400 South East Store Store $ 42,000 $ 26,600 28 , 25, 200 12,600 11,900 56,000 49,000 30,660 26,040 42,000 37,800 $211,260 $176,540 *Allocated on the basis of sales dollars. b. 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 of the North Store were dosed. She would be filling a position that would otherwise be filled by ring a new employee at a salary of $15,000 per unter Themeral manager of the North Store would continue to cam her normal salary of $16.800 per ufor. All other managers and employees in the North store would be discharged e. The company as one dellvery crew that serves all three stores. One delivery person could be discharge of the North Store were dosed. This person's salary is 55,600 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 employmentes equal to 15% of the employees Salaries 9. One third of the insurance in the North Store is on the store flatures The General office salaries and General office other relate to the overal management of Superior Markets, Inc. If the North Store were dose one person to the general office could be discharged because of the decrease in overall workload. This person's compensation is 58.400 per quarter Required: 1. How much employee salaries will the company evold in closes the North Store! 2 How much employment tes will the company avoidit it doses the North Store? What is the financial advantage disadvantages of closing the North Store! 4. Assuming that the North Store's floor space can't be subase would you recommend closing the North Store usume that the North Store thorace can't be subleased. However les introduce three more assumptions First assume that it the North Store were closed, one fourth of its soles would transfer to the store due to strong customer loyalty to Superior Marko Second, sume that the East Store has enough capacity to handle the increased sales that would ansetrom closing the North Store, Third, assume that the increased sales in the East Store would yield the same gross magas a percentage of salonas present sales in the East store. Given me woons, what is the financat advantage disadvantage of closing the North Storey O lipi | 10 8 3 S 4 5 6 00 9 P. ER ollallo