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 Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total expenses Net operating income (loss) Superior Markets, Incorporated Income Statement Total $ 3,300,000 1,822,920 For the Quarter Ended September 30 North Store $ 792,000 443,520 South Store $ 1,320,000 726,000 East Store $ 1,188,000 653,400 1,477,000 348,450 594,000 554,600 898,700 254,540 346,500 297,660 421,300 116,600 165,990 138,710 1,320,000 371,140 512,490 436,370 $157,000 5 (22,640) $ 81,510 $ 98,230 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 a. 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 Direct advertising Depreciation of store fixtures General advertising Store rent Delivery salaries Depreciation of delivery equipment $262,900 205,700 49,500 $ 77,000 56,100 $97,900 79,200 $ 38,000 70,400 11,000 19,000 17,820 330,000 93,500 152,000 104,500 17,600 5,060 6,600 5,940 23,100 7,700 7,700 7,700 9,900 3,300 3,300 3,300 $898,700 $254,540 $346,500 $297,660 Total selling expenses Total $202,900 205,700 49,500 North Store South Store East Store $77,000 $97,900 11,000 79,200 19,000 $80,000 70,400 17,820 330,000 93,500 132,000 104,500 17,600 5,060 6,500 23,100 7,700 7,700 9,900 3,300 3,300 5,940 7,700 3,300 $294,540 $346,500 $297,600 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 Administrative expenses $898,700 Total North Store South Store Store managers salaries $77,000 General office salaries 55,000 $23,100 13,200 Insurance on fixtures and inventory 27,500 0,250 $ 33,000 22,000 9,900 East Store $20,000 19,000 9,350 Utilities 116.600 34,100 44,000 30,500 Employment taxes 62,700 18,150 24,000 20,400 General office-other Total administrative expenses 82,500 $421,300 19,800 33,000 29,700 $116,600 $165,990 $138,710 Allocated on the basis of sales dollars b. 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 of the North Sife 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 $12.100 per quarter. The general manager of the North Store would continue to earn her normal salary of $13.200 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 $4,400 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. b. The lease on the building 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 $12,100 per quarter. The general manager of the North Store would continue to earn her normal salary of $13,200 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 $4,400 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. f. 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 $6,600 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. 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 41 Required 5 How much employee salaries will the company avoid if it closes the North Store? Employee salaries Required 2> Complete this question by entering your answers in the tabs below. 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 3p Required 4 Required 5 What is the financial advantage (disadvantage) of closing the North Store? (Enter any "disadvantages" as a negative va Financial advantage (disadvantage) Required 1 Required 21 Required 3 Required 4 Required 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. Given these new assumptions, what is the financial advantage: (disadvantage) of closing the North Store? (Enter any "disadvantages" as a negative value.) Financial advantage (disadvantage) Show less & < Required 4