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 Store South Store East Store Total Sales Cost of goods sold Gross margin Selling and administrative expenses: $3,200,000 $740,000 $1,280,000 $1,180,000 649,000 531,000 1,760,000 423,000 1,440,000 317,000 688,000 592,000 Selling expenses 821,000 233,400 Administrative expenses 393,000 108,000 1,214,000 341,400 316,000 153,900 469,900 271,600 131,100 402,708 Total expenses Net operating income (loss) $ 226,000 $(24,400) $ 122,100 $ 128,300 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 vour use a. The breakdown of the selling and administrative expenses that are shown above is as follows North Store South store East Store Total Selling expenses: Sales salaries Direct advertising General advertising Store rent Depreciation of store $233,800 67,100 $ 84,200 $ 82,500 181,00053,00074,000 54,000 17,700 87,000 122,000 101,000 48,000 11,100 19,200 310,000 17,000 21,600 6,000 7,200 4,800 6,200 fixtures Delivery salaries Depreciation of delivery 7,200 7,200 O Aaa Depreciation of store fixtures Delivery salaries Depreciation of delivery 6,000 7,200 3,200 $821,000 $233,400 $316,000 $271,600 17,800 21,600 9,600 4.800 7,200 3,200 6,200 7,200 3,200 equipment Total selling expenses Allocated on the basis of sales dollars North store South Store East Store Total Administrative expenses: store managers' salaries General office salaries* Insurance on fixtures and $ 73,000 22,000 $. 31,000 $ 20,000 19,200 17,600 8,900 108,540 32,07540,460 36,005 48,000 11,200 27,000 8,100 10,000 inventory Utilities Employment taxes General office-other* 56,46016,125 21,240 19,095 80,000 18,500 32,000 29,500 Total administrative expenses $393,000 $108,000 $153,900 $131,100 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 stores if the North Store were closed. 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 $10,200 per quarter. The general manager of the North Store would continue to earn her normal salary of $11,200 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 closed. This person's salary is $4,200 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 f. 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 $5,600 per quarter 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 $10,200 per quarter. The general manager of the North Store would continue to earn her normal salary of $11,200 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 closed. This person's salary is $4,200 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 f. 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 $5,600 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 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, 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? Complete this question by entering your answers in the tabs below Required 1Required 2 Required 3 Required4 Required 5 How much employee salaries will the company avoid if it closes the North Store? salaries 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 Store South Store East Store Total Sales Cost of goods sold Gross margin Selling and administrative expenses: $3,200,000 $740,000 $1,280,000 $1,180,000 649,000 531,000 1,760,000 423,000 1,440,000 317,000 688,000 592,000 Selling expenses 821,000 233,400 Administrative expenses 393,000 108,000 1,214,000 341,400 316,000 153,900 469,900 271,600 131,100 402,708 Total expenses Net operating income (loss) $ 226,000 $(24,400) $ 122,100 $ 128,300 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 vour use a. The breakdown of the selling and administrative expenses that are shown above is as follows North Store South store East Store Total Selling expenses: Sales salaries Direct advertising General advertising Store rent Depreciation of store $233,800 67,100 $ 84,200 $ 82,500 181,00053,00074,000 54,000 17,700 87,000 122,000 101,000 48,000 11,100 19,200 310,000 17,000 21,600 6,000 7,200 4,800 6,200 fixtures Delivery salaries Depreciation of delivery 7,200 7,200 O Aaa Depreciation of store fixtures Delivery salaries Depreciation of delivery 6,000 7,200 3,200 $821,000 $233,400 $316,000 $271,600 17,800 21,600 9,600 4.800 7,200 3,200 6,200 7,200 3,200 equipment Total selling expenses Allocated on the basis of sales dollars North store South Store East Store Total Administrative expenses: store managers' salaries General office salaries* Insurance on fixtures and $ 73,000 22,000 $. 31,000 $ 20,000 19,200 17,600 8,900 108,540 32,07540,460 36,005 48,000 11,200 27,000 8,100 10,000 inventory Utilities Employment taxes General office-other* 56,46016,125 21,240 19,095 80,000 18,500 32,000 29,500 Total administrative expenses $393,000 $108,000 $153,900 $131,100 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 stores if the North Store were closed. 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 $10,200 per quarter. The general manager of the North Store would continue to earn her normal salary of $11,200 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 closed. This person's salary is $4,200 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 f. 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 $5,600 per quarter 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 $10,200 per quarter. The general manager of the North Store would continue to earn her normal salary of $11,200 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 closed. This person's salary is $4,200 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 f. 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 $5,600 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 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, 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? Complete this question by entering your answers in the tabs below Required 1Required 2 Required 3 Required4 Required 5 How much employee salaries will the company avoid if it closes the North Store? salaries