Question
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 | $ | 4,140,000 | $ | 1,100,000 | $ | 1,580,000 | $ | 1,460,000 | ||||
Cost of goods sold | 2,288,000 | 616,000 | 869,000 | 803,000 | ||||||||
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Gross margin | 1,852,000 | 484,000 | 711,000 | 657,000 | ||||||||
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Selling and administrative expenses: | ||||||||||||
Selling expenses: | 1,179,900 | 353,000 | 434,700 | 392,200 | ||||||||
Administrative expenses | 622,120 | 182,100 | 232,640 | 207,380 | ||||||||
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Total expenses | 1,802,020 | 535,100 | 667,340 | 599,580 | ||||||||
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Net operating income (loss) | $ | 49,980 | $ | (51,100 | ) | $ | 43,660 | $ | 57,420 | |||
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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:
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