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 $ 3,600,000 $ 864,000 $ 1,440,000 $ 1,296,000 Cost of goods sold 1,988,640 483,840 792,000 712,800 Gross margin 1,611,360 380,160 648,000 583,200 Selling and administrative expenses Selling expenses 980,400 277,680 378,000 324,720 Administrative expenses 459,600 127,200 181,080 151,320 Total expenses 1,440,000 404,880 559,080 476,040 Net operating income (loss) $ 171,360 $ (24,720) $ 88,920 $ 107,160 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 $ 286,800 $ 84,000 $ 106,800 $ 96,000 Direct advertising 224,400 61,200 86,400 76,800 General advertising 54,000 12,960 21,600 19,440 Store rent 360,000 102,000 144,000 114,000 Depreciation of store fixtures 19,200 5,520 7,200 6,480 Delivery salaries 25,200 8,400 8,400 8,400 Depreciation of delivery equipment 10,800 3,600 3,600 3,600 Total selling expenses $ 980,400 $ 277,680 $ 378,000 $ 324,720 Allocated on the basis of sales dollars Total North Store South Store East Store Administrative expenses Store managers' salaries $ 84,000 $ 25,200 $ 36,000 $ 22,800 General office salaries 60,000 14,400 24,000 21,600 Insurance on fixtures and inventory 30,000 9,000 10,800 10,200 Utilities 127,200 37,200 48,000 42,000 Employment taxes 68,400 19,800 26,280 22,320 General officeother 90,000 21,600 36,000 32,400 Total administrative expenses $ 459,600 $ 127,200 $ 181,080 $ 151,320 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 $13,200 per quarter The general manager of the North Store would continue to earn her normal salary of $14,400 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 $4,800 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 $7,200 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	$ 3,600,000	$ 864,000	$ 1,440,000	$ 1,296,000
Cost of goods sold	1,988,640	483,840	792,000	712,800
Gross margin	1,611,360	380,160	648,000	583,200
Selling and administrative expenses:
Selling expenses	980,400	277,680	378,000	324,720
Administrative expenses	459,600	127,200	181,080	151,320
Total expenses	1,440,000	404,880	559,080	476,040
Net operating income (loss)	$ 171,360	$ (24,720)	$ 88,920	$ 107,160

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	$ 286,800	$ 84,000	$ 106,800	$ 96,000
Direct advertising	224,400	61,200	86,400	76,800
General advertising*	54,000	12,960	21,600	19,440
Store rent	360,000	102,000	144,000	114,000
Depreciation of store fixtures	19,200	5,520	7,200	6,480
Delivery salaries	25,200	8,400	8,400	8,400
Depreciation of delivery equipment	10,800	3,600	3,600	3,600
Total selling expenses	$ 980,400	$ 277,680	$ 378,000	$ 324,720

*Allocated on the basis of sales dollars.

	Total	North Store	South Store	East Store
Administrative expenses:
Store managers' salaries	$ 84,000	$ 25,200	$ 36,000	$ 22,800
General office salaries*	60,000	14,400	24,000	21,600
Insurance on fixtures and inventory	30,000	9,000	10,800	10,200
Utilities	127,200	37,200	48,000	42,000
Employment taxes	68,400	19,800	26,280	22,320
General officeother*	90,000	21,600	36,000	32,400
Total administrative expenses	$ 459,600	$ 127,200	$ 181,080	$ 151,320

*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 $13,200 per quarter. The general manager of the North Store would continue to earn her normal salary of $14,400 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 $4,800 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 $7,200 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?