Thrifty Markets, Inc., operates three stores in a large metropolitan area. The companys segmented absorption costing income statement for the last quarter is given below: Thrifty Markets, Inc. Income Statement For the Quarter Ended March 31 Total Uptown Store Downtown Store Westpark Store Sales $ 3,100,000 $

Thrifty Markets, Inc., operates three stores in a large metropolitan area. The companys segmented absorption costing income statement for the last quarter is given below:

Thrifty Markets, Inc. Income Statement For the Quarter Ended March 31
	Total			Uptown Store			Downtown Store			Westpark Store
Sales	$	3,100,000		$	1,200,000		$	600,000		$	1,300,000
Cost of goods sold		1,572,000			648,000			358,000			566,000
Gross margin		1,528,000			552,000			242,000			734,000
Selling and administrative expenses:
Selling expenses:
Direct advertising		116,100			31,000			43,000			42,100
General advertising*		16,000			6,194			3,097			6,709
Sales salaries		154,000			50,000			42,000			62,000
Delivery salaries		39,000			13,000			13,000			13,000
Store rent		207,000			70,000			62,000			75,000
Depreciation of store fixtures		46,700			18,200			8,700			19,800
Depreciation of delivery equipment		27,000			9,000			9,000			9,000
Total selling expenses		605,800			197,394			180,797			227,609
Administrative expenses:
Store management salaries		71,000			24,000			18,000			29,000
General office salaries*		41,000			15,871			7,935			17,194
Utilities		97,600			33,000			31,000			33,600
Insurance on fixtures and inventory		23,100			7,200			8,200			7,700
Employment taxes		37,600			11,100			12,800			13,700
General office expensesother*		22,000			8,516			4,258			9,226
Total administrative expenses		292,300			99,687			82,193			110,420
Total operating expenses		898,100			297,081			262,990			338,029

*Allocated on the basis of sales dollars.

Management is very concerned about the Downtown Stores inability to show a profit, and consideration is being given to closing the store. The company has asked you to make a recommendation as to what course of action should be taken. The following additional information is available about the store:

a.	The manager of the store has been with the company for many years; he would be retained and transferred to another position in the company if the store were closed. His salary is $6,000 per month, or $18,000 per quarter. If the store were not closed, a new employee would be hired to fill the other position at a salary of $5,000 per month.
b.	The lease on the building housing the Downtown Store can be broken with no penalty.
c.	The fixtures being used in the Downtown Store would be transferred to the other two stores if the Downtown Store were closed.
d.	The companys employment taxes are 13% of salaries.
e.	A single delivery crew serves all three stores. One delivery person could be discharged if the Downtown Store were closed; this persons salary amounts to $9,000 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but it does eventually become obsolete.
f.	One-third of the Downtown Stores insurance relates to its fixtures.
g.	The general office salaries and other expenses relate to the general management of Thrifty Markets, Inc. The employee in the general office who is responsible for the Downtown Store would be discharged if the store were closed. This employees compensation amounts to $7,000 per quarter.

Required:
1.	Prepare a schedule showing the change in revenues and expenses and the impact on the overall company net operating income that would result if the Downtown Store were closed.

Assume that if the Downtown Store were closed, sales in the Uptown Store would increase by $300,000 per quarter due to loyal customers shifting their buying to the Uptown Store. The Uptown Store has ample capacity to handle the increased sales, and its gross margin is 46% of sales.

a.	Calculate the Net advantage of closing the Downtown Store. (Any reductions or outflows should be indicated by a minus sign.)

Gross margin lost if the downtown store is closed
Gross margin gained at the uptown store
Net gain (loss) in gross margin
Costs that can be avoided if the downtown store is closed
Net advantage (disadvantage) of closing the downtown store