Superior Markets, Incorporated

Income Statement

For the Quarter Ended September $30$

Total North Store South Store East Store

Sales $$3,300,000$ $$792,000$ $$1,320,000$ $$1,188,000$

Cost of goods sold $$1,822,920$ $$443,520$ $$726,000$ $$653,400$

Gross margin $$1,477,080$ $$348,480$ $$594,000$ $$534,600$

Selling and administrative expenses:

Selling expenses $$898,700$ $$254,540$ $$346,500$ $$297,660$

Administrative expenses $$421,300$ $$116,600$ $$165,990$ $$138,710$

Total expenses $$1,320,000$ $$371,140$ $$512,490$ $$436,370$

Net operating income $($loss$)$ $$157,080$ $$(22,660)$ $$81,510$ $$98,230$

Additional Information:

Selling Expenses Breakdown:

Total North Store South Store East Store

Sales salaries $$262,900$ $$77,000$ $$97,900$ $$88,000$

Direct advertising $$205,700$ $$56,100$ $$79,200$ $$70,400$

General advertising $$49,500$ $$11,880$ $$19,800$ $$17,820$

Store rent $$330,000$ $$93,500$ $$132,000$ $$104,500$

Depreciation of store fixtures $$17,600$ $$5,060$ $$6,600$ $$5,940$

Delivery salaries $$23,100$ $$7,700$ $$7,700$ $$7,700$

Depreciation of delivery equipment $$9,900$ $$3,300$ $$3,300$ $$3,300$

Total selling expenses $$898,700$ $$254,540$ $$346,500$ $$297,660$

Administrative Expenses Breakdown:

Total North Store South Store East Store

Store managers' salaries $$77,000$ $$23,100$ $$33,000$ $$20,900$

General office salaries $$55,000$ $$13,200$ $$22,000$ $$19,800$

Insurance on fixtures and inventory $$27,500$ $$8,250$ $$9,900$ $$9,350$

Utilities $$116,600$ $$34,100$ $$44,000$ $$38,500$

Employment taxes $$62,700$ $$18,150$ $$24,090$ $$20,460$

General office$$other $$82,500$ $$19,800$ $$33,000$ $$29,700$

Total administrative expenses $$421,300$ $$116,600$ $$165,990$ $$138,710$

Additional Information for Decision Making:

$-$ The lease on the building housing the North Store can be broken with no penalty.

$-$ Fixtures from the North Store would be transferred to other stores if closed.

$-$ The North Store's general manager would be retained in another position, avoiding hiring costs of $$12,100$ per quarter.

$-$ One delivery person could be discharged if the North Store closes, saving $$4,400$ per quarter.

$-$ The company pays employment taxes equal to $15\%$ of employees' salaries.

$-$ One$-$fourth of the North Store's sales would transfer to the East Store if closed.

 

 

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?

$5.$ Given new assumptions, what is the financial advantage $($disadvantage$)$ of closing the North Store?