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 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total expenses Net operating income (loss) North Store $ 3,780,000 $ 907,200 2,088,072 1,691,928 1,029,420 482,580 1,512,000 508,032 South Store $ 1,512,000 831,600 East Store $ 1,360,800 748,440 399,168 680,400 612,360 291,564 396,900 340,956 133,560 190,134 158,886 425,124 587,034 499,842 $ 179,928 $ (25,956) $ 93,366 $ 112,518 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: a. The breakdown of the selling and administrative expenses that are shown above is as follows: Selling expenses: Sales salaries Direct advertising General advertising* Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery equipment Total selling expenses *Allocated on the basis of sales dollars. Administrative expenses: Store managers' salaries General office salaries* Insurance on fixtures and inventory Utilities Employment taxes General office-other* Total administrative expenses *Allocated on the basis of sales dollars. Total North Store South Store East Store $ 301,140 235,620 56,700 $ 88,200 $ 112,140 64,260 90,720 $ 100,800 80,640 13,608 22,680 20,412 378,000 107,100 151,200 119,700 20,160 5,796 7,560 6,804 26,460 8,820 8,820 8,820 11,340 3,780 3,780 3,780 $ 1,029,420 $ 291,564 $ 396,900 $ 340,956 Total North Store South Store East Store $ 88,200 63,000 $ 26,460 15,120 $ 37,800 $ 23,940 25,200 22,680 31,500 133,560 9,450 11,340 10,710 39,060 50,400 44,100 71,820 20,790 27,594 23,436 94,500 22,680 37,800 34,020 $ 482,580 $ 133,560 $ 190,134 $ 158,886 b. The lease on the building housing the North Store can be broken with no penalty. c. The fixtures being used in the North Store would be transferred to the other two stores if the North Store were closed. d. 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 $13,860 per quarter. The general manager of the North Store would continue to earn her normal salary of $15,120 per quarter. All other managers and employees in the North store would be discharged. e. The company has one delivery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person's salary is $5,040 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. f. The company pays employment taxes equal to 15% of their employees' salaries. g. One-third of the insurance in the North Store is on the store's fixtures. h. The "General office salaries and General office-other 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 person's compensation is $7,560 per quarter.