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: Sales Superior Markets, Incorporated Income Statement For the Quarter Ended September 30 Total Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total expenses Net operating income (loss) North Store South Store East Store $ $ 4,200,000 $ 1,680,000 1,008,000 $ 1,512,000 2,320,080 564,480 924,000 831,600 1,879,920 443,520 756,000 680,400 1,143,800 323,960 441,000 378,840 536,200 148,400 211,260 176,540 1,680,000 472,360 652,260 555,380 $ 199,920 $ (28,840) $ 103,740 $ 125,020 The North Store has consistently shown losses over the past two years, so management is considering closing this store. a. A detailed breakdown of the selling and administrative expenses shown above is as follows: Total North Store South Store East Store Selling expenses: Sales salaries Direct advertising General advertising* Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery equipment Total selling expenses *Allocated on the basis of sales dollars. $ 334,600 261,800 63,000 $ 98,000 $ 124,600 $ 112,000 71,400 15,120 100,800 25,200 89,600 22,680 420,000 119,000 168,000 133,000 22,400 6,440 8,400 7,560 29,400 9,800 9,800 9,800 12,600 4,200 4,200 4,200 $ 1,143,800 $ 323,960 $ 441,000 $ 378,840 Administrative expenses: Store managers' salaries General office salaries* Insurance on fixtures and inventory Utilities Employment taxes General office-other* Total administrative expenses *Allocated on the basis of sales dollars. Total North Store South Store East Store $ 98,000 70,000 $ 29,400 16,800 $ 42,000 28,000 $ 26,600 25,200 35,000 148,400 10,500 12,600 11,900 43,400 56,000 49,000 79,800 23,100 30,660 26,040 105,000 25,200 42,000 37,800 $ 536,200 $ 148,400 $ 211,260 $ 176,540 b. The North Store's rental agreement can be broken with no penalty. c. The North Store's fixtures would be transferred to the other two stores if it were closed. d. The North Store's general manager would be transferred to another position in the company if it were closed. She would fill a position that otherwise would have required hiring a new employee at a salary of $15,400 per quarter. The general manager of the North Store would continue to earn her normal salary of $16,800 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 $5,600 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use. f. The company pays employment taxes equal to 15% of their employees' salaries. g. One-third of the North Store's insurance relates to its 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 $8,400 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 the North Store's floor space can't be subleased, would you recommend closing the North Store? 5. Assume the North Store's floor space can't be subleased. However, let's introduce three more assumptions. First, 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, the East Store has enough capacity to handle the increased sales that would arise from closing the North Store. Third, 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 1 Required 2 Required 3 Required 4 Required 5 How much employee salaries will the company avoid if it closes the North Store? Employee salaries Required 1 Required 2 Required 3 Required 4 Required 5 How much employment taxes will the company avoid if it closes the North Store? Employment taxes Required 1 Required 2 Required 3 Required 4 Required 5 What is the financial advantage (disadvantage) of closing the North Store? Note: Enter any "disadvantages" as a negative value. Financial advantage (disadvantage) Required 1 Required 2 Required 3 Required 4 Required 5 Assuming the North Store's floor space can't be subleased, would you recommend closing the North Store? Required 1 Required 2 Required 3 Required 4 Required 5 Assume the North Store's floor space can't be subleased. However, let's introduce three more assumptions. First, 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, the East Store has enough capacity to handle the increased sales that would arise from closing the North Store. Third, 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? Note: Enter any "disadvantages" as a negative value. Financial advantage (disadvantage) Show less