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 Superior Markets, Incorporated Income Statement For the Quarter Ended September 30, Selling and administrative expenses Selling expenses Administrative expenses Total expenses Net operating income (loss) Total $ 4,020,000 2,220,648 1,799,352 1,094,780 513,220 1,608,000 North Store $ 964,800 540,288 424,512 South Store East Store $ 1,447,200 795,960 $ 1,608,000 884,400 723,600 310,076 422,100 142,040 202,206 452,116 624,306 $ 99,294 $ 191,352 $ (27,604) 651,240 362,604 168,974 531,578 $ 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: a. The breakdown of the selling and administrative expenses that are shown above is as follows: Selling expenses: Sales salaries Direct advertising General advertising* Store rent Depreciation of store fixtures Depreciation of delivery equipment Delivery salaries Total selling expenses "Allocated on the basis of sales dollars. Administrative expenses: Store managers salaries: General office salaries Insurance on fixtures and inventory Utilities Employment taxes General office-other Total administrative expenses Total North Store South Store East Store $ 320,260 250,580 60,300 $ 93,800 68,340 14,472 $ 119,260 96,480 24,120 402,000 113,900 160,800 21,440 6,164 8,040 28,140 9,380 9,380 $ 107,200 85,760 21,708 127,300 7,236 9,380 12,060 4,020 4,020 4,020 $ 1,094,780 $310,076 $ 422,100 $ 362,604 Total North Store South Store East Store. $ 93,800 $ 28,140 $ 40,200 $ 25,460 67,000 33,500 142,040 76,380 100,500 16,080 26,800 24,120 10,050 12,060 11,390 41,540 53,600 46,900 22,110 29,346 24,924 24,120 40,200 36,180 $ 513,220 $ 142,040 $ 202,206 $ 168,974 Brou 7 of 7 boxt 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 $ 93,800 $28,140 $ 40,200 $25,460 67,000 16,080 26,000 24,120 33,500 10,050 12,060 11,390 142,040 41,540 53,600 46,900 76,380 22,110 29,346 24,924 100,500 24,120 40,200 36,100 $ 513,220 $142,040 $202,206 $168,974 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 $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. 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 $5,360 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. 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 $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 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. 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 4 Required 5 How much employee salaries will the company avoid if it closes the North Store? Employee salaries 135,608 Required 1 Required 2 > 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 Required 3 Required 4 Required 5 Employment taxes How much employment taxes will the company avoid if it closes the North Store? < Required 1 - E Required 3 > 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 11 Required 2 Required 3 Required 4 Required 5 What is the financial advantage (disadvantage) of closing the North Store? (Enter any "disadvantages" as a negative value.) Financial advantage (disadvantage) < Required 2 Required 4 > 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 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) < Required 4 Required 5 Show less