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 $ 3,480,000 $ 835,200 $ 1,392,000 $ 1,252,800 Cost of goods sold 1,922,352 467,712 765,600 689,040 Gross margin 1,557,648 367,488 626,400 563,760 Selling and administrative expenses Selling expenses 947,720 268,424 365,400 313,896 Administrative expenses 444,280 122,960 175,044 146,276 Total expenses 1,392,000 391,384 540,444 460,172 Net operating income (loss) $ 165,648 $ (23,896) $ 85,956 $ 103,588 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 $ 277,240 $ 81,200 $ 103,240 $ 92,800 Direct advertising 216,920 59,160 83,520 74,240 General advertising 52,200 12,528 20,880 18,792 Store rent 348,000 98,600 139,200 110,200 Depreciation of store fixtures 18,560 5,336 6,960 6,264 Delivery salaries 24,360 8,120 8,120 8,120 Depreciation of delivery equipment 10,440 3,480 3,480 3,480 Total selling expenses $ 947,720 $ 268,424 $ 365,400 $ 313,896 Allocated on the basis of sales dollars Total North Store South Store East Store Administrative expenses Store managers' salaries $ 81,200 $ 24,360 $ 34,800 $ 22,040 General office salaries 58,000 13,920 23,200 20,880 Insurance on fixtures and inventory 29,000 8,700 10,440 9,860 Utilities 122,960 35,960 46,400 40,600 Employment taxes 66,120 19,140 25,404 21,576 General officeother 87,000 20,880 34,800 31,320 Total administrative expenses $ 444,280 $ 122,960 $ 175,044 $ 146,276 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 $12,760 per quarter The general manager of the North Store would continue to earn her normal salary of $13,920 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 $4,640 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 $6,960 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	$ 3,480,000	$ 835,200	$ 1,392,000	$ 1,252,800
Cost of goods sold	1,922,352	467,712	765,600	689,040
Gross margin	1,557,648	367,488	626,400	563,760
Selling and administrative expenses:
Selling expenses	947,720	268,424	365,400	313,896
Administrative expenses	444,280	122,960	175,044	146,276
Total expenses	1,392,000	391,384	540,444	460,172
Net operating income (loss)	$ 165,648	$ (23,896)	$ 85,956	$ 103,588

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	$ 277,240	$ 81,200	$ 103,240	$ 92,800
Direct advertising	216,920	59,160	83,520	74,240
General advertising*	52,200	12,528	20,880	18,792
Store rent	348,000	98,600	139,200	110,200
Depreciation of store fixtures	18,560	5,336	6,960	6,264
Delivery salaries	24,360	8,120	8,120	8,120
Depreciation of delivery equipment	10,440	3,480	3,480	3,480
Total selling expenses	$ 947,720	$ 268,424	$ 365,400	$ 313,896

*Allocated on the basis of sales dollars.

	Total	North Store	South Store	East Store
Administrative expenses:
Store managers' salaries	$ 81,200	$ 24,360	$ 34,800	$ 22,040
General office salaries*	58,000	13,920	23,200	20,880
Insurance on fixtures and inventory	29,000	8,700	10,440	9,860
Utilities	122,960	35,960	46,400	40,600
Employment taxes	66,120	19,140	25,404	21,576
General officeother*	87,000	20,880	34,800	31,320
Total administrative expenses	$ 444,280	$ 122,960	$ 175,044	$ 146,276

*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 $12,760 per quarter. The general manager of the North Store would continue to earn her normal salary of $13,920 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 $4,640 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 $6,960 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?