Superior Markets, Incorporated, 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, Incorporated Income Statement For the Quarter Ended September 30
	Total	North Store	South Store	East Store
Sales	$ 3,840,000	$ 921,600	$ 1,536,000	$ 1,382,400
Cost of goods sold	2,121,216	516,096	844,800	760,320
Gross margin	1,718,784	405,504	691,200	622,080
Selling and administrative expenses:
Selling expenses	1,045,760	296,192	403,200	346,368
Administrative expenses	490,240	135,680	193,152	161,408
Total expenses	1,536,000	431,872	596,352	507,776
Net operating income (loss)	$ 182,784	$ (26,368)	$ 94,848	$ 114,304

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:

The breakdown of the selling and administrative expenses that are shown above is as follows:

	Total	North Store	South Store	East Store
Selling expenses:
Sales salaries	$ 305,920	$ 89,600	$ 113,920	$ 102,400
Direct advertising	239,360	65,280	92,160	81,920
General advertising*	57,600	13,824	23,040	20,736
Store rent	384,000	108,800	153,600	121,600
Depreciation of store fixtures	20,480	5,888	7,680	6,912
Delivery salaries	26,880	8,960	8,960	8,960
Depreciation of delivery equipment	11,520	3,840	3,840	3,840
Total selling expenses	$ 1,045,760	$ 296,192	$ 403,200	$ 346,368

*Allocated on the basis of sales dollars.

	Total	North Store	South Store	East Store
Administrative expenses:
Store managers' salaries	$ 89,600	$ 26,880	$ 38,400	$ 24,320
General office salaries*	64,000	15,360	25,600	23,040
Insurance on fixtures and inventory	32,000	9,600	11,520	10,880
Utilities	135,680	39,680	51,200	44,800
Employment taxes	72,960	21,120	28,032	23,808
General officeother*	96,000	23,040	38,400	34,560
Total administrative expenses	$ 490,240	$ 135,680	$ 193,152	$ 161,408

*Allocated on the basis of sales dollars.

b. The lease on the buliding 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 $14,080 per quarter. The general manager of the North Store would continue to earn her normal salary of $15,360 per quarter. All other managers and employees in the North store would be discharged. e. The company has one dellvery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person's salary is $5,120 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. 6. 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, Incorporated. 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 $7,680 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. Glven these new assumptions, what is the financial advantage (disadvantage) of closing the North Store