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	$ 4,200,000	$ 1,008,000	$ 1,680,000	$ 1,512,000
Cost of goods sold	2,320,080	564,480	924,000	831,600
Gross margin	1,879,920	443,520	756,000	680,400
Selling and administrative expenses:
Selling expenses	1,143,800	323,960	441,000	378,840
Administrative expenses	536,200	148,400	211,260	176,540
Total expenses	1,680,000	472,360	652,260	555,380
Net operating income (loss)	$ 199,920	$ (28,840)	$ 103,740	$ 125,020

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	$ 334,600	$ 98,000	$ 124,600	$ 112,000
Direct advertising	261,800	71,400	100,800	89,600
General advertising*	63,000	15,120	25,200	22,680
Store rent	420,000	119,000	168,000	133,000
Depreciation of store fixtures	22,400	6,440	8,400	7,560
Delivery salaries	29,400	9,800	9,800	9,800
Depreciation of delivery equipment	12,600	4,200	4,200	4,200
Total selling expenses	$ 1,143,800	$ 323,960	$ 441,000	$ 378,840

*Allocated on the basis of sales dollars.

	Total	North Store	South Store	East Store
Administrative expenses:
Store managers' salaries	$ 98,000	$ 29,400	$ 42,000	$ 26,600
General office salaries*	70,000	16,800	28,000	25,200
Insurance on fixtures and inventory	35,000	10,500	12,600	11,900
Utilities	148,400	43,400	56,000	49,000
Employment taxes	79,800	23,100	30,660	26,040
General officeother*	105,000	25,200	42,000	37,800
Total administrative expenses	$ 536,200	$ 148,400	$ 211,260	$ 176,540

*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 $15,400 per quarter. The general manager of the North Store would continue to earn her normal salary of $16,800 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 $5,600 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 $8,400 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?