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 $ 4,080,000 $ 979,200 $ 1,632,000 $ 1,468,800 Cost of goods sold 2,253,792 548,352 897,600 807,840 Gross margin 1,826,208 430,848 734,400 660,960 Selling and administrative expenses Selling expenses 1,111,120 314,704 428,400 368,016 Administrative expenses 520,880 144,160 205,224 171,496 Total expenses 1,632,000 458,864 633,624 539,512 Net operating income (loss) $ 194,208 $ (28,016) $ 100,776 $ 121,448 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 $ 325,040 $ 95,200 $ 121,040 $ 108,800 Direct advertising 254,320 69,360 97,920 87,040 General advertising 61,200 14,688 24,480 22,032 Store rent 408,000 115,600 163,200 129,200 Depreciation of store fixtures 21,760 6,256 8,160 7,344 Delivery salaries 28,560 9,520 9,520 9,520 Depreciation of delivery equipment 12,240 4,080 4,080 4,080 Total selling expenses $ 1,111,120 $ 314,704 $ 428,400 $ 368,016 Allocated on the basis of sales dollars Total North Store South Store East Store Administrative expenses Store managers' salaries $ 95,200 $ 28,560 $ 40,800 $ 25,840 General office salaries 68,000 16,320 27,200 24,480 Insurance on fixtures and inventory 34,000 10,200 12,240 11,560 Utilities 144,160 42,160 54,400 47,600 Employment taxes 77,520 22,440 29,784 25,296 General officeother 102,000 24,480 40,800 36,720 Total administrative expenses $ 520,880 $ 144,160 $ 205,224 $ 171,496 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 $14,960 per quarter The general manager of the North Store would continue to earn her normal salary of $16,320 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 $5,440 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 $8,160 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

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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

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:

	Total	North Store	South Store	East Store
Superior Markets, Incorporated Income Statement For the Quarter Ended September 30
Sales	$ 4,080,000	$ 979,200	$ 1,632,000	$ 1,468,800
Cost of goods sold	2,253,792	548,352	897,600	807,840
Gross margin	1,826,208	430,848	734,400	660,960
Selling and administrative expenses:
Selling expenses	1,111,120	314,704	428,400	368,016
Administrative expenses	520,880	144,160	205,224	171,496
Total expenses	1,632,000	458,864	633,624	539,512
Net operating income (loss)	$ 194,208	$ (28,016)	$ 100,776	$ 121,448

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	$ 325,040	$ 95,200	$ 121,040	$ 108,800
Direct advertising	254,320	69,360	97,920	87,040
General advertising*	61,200	14,688	24,480	22,032
Store rent	408,000	115,600	163,200	129,200
Depreciation of store fixtures	21,760	6,256	8,160	7,344
Delivery salaries	28,560	9,520	9,520	9,520
Depreciation of delivery equipment	12,240	4,080	4,080	4,080
Total selling expenses	$ 1,111,120	$ 314,704	$ 428,400	$ 368,016

*Allocated on the basis of sales dollars.

	Total	North Store	South Store	East Store
Administrative expenses:
Store managers' salaries	$ 95,200	$ 28,560	$ 40,800	$ 25,840
General office salaries*	68,000	16,320	27,200	24,480
Insurance on fixtures and inventory	34,000	10,200	12,240	11,560
Utilities	144,160	42,160	54,400	47,600
Employment taxes	77,520	22,440	29,784	25,296
General officeother*	102,000	24,480	40,800	36,720
Total administrative expenses	$ 520,880	$ 144,160	$ 205,224	$ 171,496

*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 $14,960 per quarter. The general manager of the North Store would continue to earn her normal salary of $16,320 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 $5,440 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 $8,160 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?