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	$ 4,020,000	$ 964,800	$ 1,608,000	$ 1,447,200
Cost of goods sold	2,220,648	540,288	884,400	795,960
Gross margin	1,799,352	424,512	723,600	651,240
Selling and administrative expenses:
Selling expenses	1,094,780	310,076	422,100	362,604
Administrative expenses	513,220	142,040	202,206	168,974
Total expenses	1,608,000	452,116	624,306	531,578
Net operating income (loss)	$ 191,352	$ (27,604)	$ 99,294	$ 119,662

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	$ 320,260	$ 93,800	$ 119,260	$ 107,200
Direct advertising	250,580	68,340	96,480	85,760
General advertising*	60,300	14,472	24,120	21,708
Store rent	402,000	113,900	160,800	127,300
Depreciation of store fixtures	21,440	6,164	8,040	7,236
Delivery salaries	28,140	9,380	9,380	9,380
Depreciation of delivery equipment	12,060	4,020	4,020	4,020
Total selling expenses	$ 1,094,780	$ 310,076	$ 422,100	$ 362,604

*Allocated on the basis of sales dollars.

	Total	North Store	South Store	East Store
Administrative expenses:
Store managers' salaries	$ 93,800	$ 28,140	$ 40,200	$ 25,460
General office salaries*	67,000	16,080	26,800	24,120
Insurance on fixtures and inventory	33,500	10,050	12,060	11,390
Utilities	142,040	41,540	53,600	46,900
Employment taxes	76,380	22,110	29,346	24,924
General officeother*	100,500	24,120	40,200	36,180
Total administrative expenses	$ 513,220	$ 142,040	$ 202,206	$ 168,974

*Allocated on the basis of sales dollars.

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 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 $14,740 per quarter. The general manager of the North Store would continue to earn her normal salary of $16,080 per quarter. All other managers and employees in the North store would be discharged.

The company has one delivery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This persons salary is $5,360 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 employment taxes equal to 15% of their employees' salaries.

One-third of the insurance in the North Store is on the stores fixtures.

The General office salaries and General officeother 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 persons compensation is $8,040 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 cant be subleased, would you recommend closing the North Store?

5. Assume that the North Store's floor space cant 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?