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 Total expenses Administrative expenses Net operating income (loss) Superior Markets, Incorporated Income Statement Total $ 3,360,000 1,856,064 For the Quarter Ended September 38 North Store $ 806,480 451,584 South Store $ 1,344,000 739,200 1,583,936 354,816 604,880 East Store $ 1,209,600 665,280 544,320 915,848 259,168 352,800 383,072 428,960 118,728 160,008 141,232 1,344,000 377,888 521,888 444,304 $ 159,936 $ (23,072) $82,992 $ 180,016 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: Direct advertising Depreciation of store fixtures Sales salaries General advertising" Stare rent Delivery salaries Depreciation of delivery equipment 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 $267,688 289,448 50,400 $ 78,400 57,128 $ 99, 80,648 12,006 20,160 $ 89,600 71,688 18,144 336,000 95,200 134,400 186,400 17,928 5,152 6,728 23,520 7,840 7,848 10,080 3,368 3,368 5,048 7,848 3,368 $ 915,848 $ 259,168 $352,800 $ 383,872 Total North Store South Store East Store $ 78,488 56,800 28,000 $ 23,528 13,448 8,400 $ 33,600 $ 21,288 22,400 20,160 10,080 9,528 118,728 34,720 44,800 39,200 63,848 18,488 24,528 28,812 84,000 $428,968 28,160 33,600 38,248 $118,720 $ 169,008 $141,232 *Allocated on the basis of sales dollars. b. The lease on the building housing the North Store can be broken with no pensity. 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 $12,320 per quarter. The general manager of the North Store would continue to earn her normal salary of $13,440 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 $4,480 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 $6,720 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 4 Required 5 How much employee salaries will the company avoid if it closes the North Store? Employee salaries