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 $ 3,120,000 $ 748,800 $ 1,248,000 $ 1,123,200 Cost of goods sold 1,723,488 419,328 686,400 617,760 Gross margin 1,396,512 329,472 561,600 505,440 Selling and administrative expenses Selling expenses 849,680 240,656 327,600 281,424 Administrative expenses 398,320 110,240 156,936 131,144 Total expenses 1,248,000 350,896 484,536 412,568 Net operating income (loss) $ 148,512 $ (21,424) $ 77,064 $ 92,872 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 $ 248,560 $ 72,800 $ 92,560 $ 83,200 Direct advertising 194,480 53,040 74,880 66,560 General advertising 46,800 11,232 18,720 16,848 Store rent 312,000 88,400 124,800 98,800 Depreciation of store fixtures 16,640 4,784 6,240 5,616 Delivery salaries 21,840 7,280 7,280 7,280 Depreciation of delivery equipment 9,360 3,120 3,120 3,120 Total selling expenses $ 849,680 $ 240,656 $ 327,600 $ 281,424 Allocated on the basis of sales dollars Total North Store South Store East Store Administrative expenses Store managers' salaries $ 72,800 $ 21,840 $ 31,200 $ 19,760 General office salaries 52,000 12,480 20,800 18,720 Insurance on fixtures and inventory 26,000 7,800 9,360 8,840 Utilities 110,240 32,240 41,600 36,400 Employment taxes 59,280 17,160 22,776 19,344 General officeother 78,000 18,720 31,200 28,080 Total administrative expenses $ 398,320 $ 110,240 $ 156,936 $ 131,144 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 $11,440 per quarter The general manager of the North Store would continue to earn her normal salary of $12,480 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 $4,160 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 $6,240 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	$ 3,120,000	$ 748,800	$ 1,248,000	$ 1,123,200
Cost of goods sold	1,723,488	419,328	686,400	617,760
Gross margin	1,396,512	329,472	561,600	505,440
Selling and administrative expenses:
Selling expenses	849,680	240,656	327,600	281,424
Administrative expenses	398,320	110,240	156,936	131,144
Total expenses	1,248,000	350,896	484,536	412,568
Net operating income (loss)	$ 148,512	$ (21,424)	$ 77,064	$ 92,872

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	$ 248,560	$ 72,800	$ 92,560	$ 83,200
Direct advertising	194,480	53,040	74,880	66,560
General advertising*	46,800	11,232	18,720	16,848
Store rent	312,000	88,400	124,800	98,800
Depreciation of store fixtures	16,640	4,784	6,240	5,616
Delivery salaries	21,840	7,280	7,280	7,280
Depreciation of delivery equipment	9,360	3,120	3,120	3,120
Total selling expenses	$ 849,680	$ 240,656	$ 327,600	$ 281,424

*Allocated on the basis of sales dollars.

	Total	North Store	South Store	East Store
Administrative expenses:
Store managers' salaries	$ 72,800	$ 21,840	$ 31,200	$ 19,760
General office salaries*	52,000	12,480	20,800	18,720
Insurance on fixtures and inventory	26,000	7,800	9,360	8,840
Utilities	110,240	32,240	41,600	36,400
Employment taxes	59,280	17,160	22,776	19,344
General officeother*	78,000	18,720	31,200	28,080
Total administrative expenses	$ 398,320	$ 110,240	$ 156,936	$ 131,144

*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 $11,440 per quarter. The general manager of the North Store would continue to earn her normal salary of $12,480 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 $4,160 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 $6,240 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?