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		1,565,000			648,000			356,000			561,000
Gross margin		1,535,000			552,000			244,000			739,000
Selling and administrative expenses:
Selling expenses:
Direct advertising		121,600			37,000			42,000			42,600
General advertising*		17,000			6,581			3,290			7,129
Sales salaries		155,000			51,000			42,000			62,000
Delivery salaries		36,000			12,000			12,000			12,000
Store rent		205,000			69,000			62,000			74,000
Depreciation of store fixtures		46,240			17,600			8,800			19,840
Depreciation of delivery equipment		27,000			9,000			9,000			9,000
Total selling expenses		607,840			202,181			179,090			226,569
Administrative expenses:
Store management salaries		67,000			22,000			18,000			27,000
General office salaries*		44,000			17,032			8,516			18,452
Utilities		96,600			32,000			32,000			32,600
Insurance on fixtures and inventory		25,200			7,900			8,900			8,400
Employment taxes		36,600			11,200			12,300			13,100
General office expensesother*		21,000			8,129			4,065			8,806
Total administrative expenses		290,400			98,261			83,781			108,358
Total operating expenses		898,240			300,442			262,871			334,927
Net operating income (loss)	$	636,760		$	251,558		$	(18,871	)	$	404,073

*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 14% 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 $9,500 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 $5,000 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. (Input all amounts as positive values. Do not round your intermediate calculations. Round your final answers to the nearest dollar amount.)

Thrifty Markets, Inc. Schedule showing the change in revenues and expenses For the Quarter Ended March 31
(Click to select)Gross margin lost if the store is closedGross margin gained if the store is closed		$
Less costs that can be avoided:
(Click to select)Store rentDirect advertisingInsurance on inventoriesStore management salariesGeneral advertisingEmployment taxesGeneral office salariesDelivery salariesSales salariesUtilitiesGeneral office expenses-other	$
(Click to select)UtilitiesDelivery salariesInsurance on inventoriesGeneral advertisingGeneral office salariesStore rentDirect advertisingSales salariesEmployment taxesStore management salariesGeneral office expenses-other
(Click to select)UtilitiesInsurance on inventoriesDirect advertisingGeneral advertisingGeneral office expenses-otherSales salariesEmployment taxesDelivery salariesStore rentStore management salariesGeneral office salaries
(Click to select)UtilitiesStore management salariesGeneral advertisingGeneral office salariesDelivery salariesInsurance on inventoriesDirect advertisingSales salariesEmployment taxesGeneral office expenses-otherStore rent
(Click to select)Sales salariesDelivery salariesDirect advertisingInsurance on inventoriesStore management salariesGeneral office expenses-otherUtilitiesGeneral office salariesStore rentEmployment taxesGeneral advertising
(Click to select)Delivery salariesEmployment taxesDirect advertisingInsurance on inventoriesGeneral advertisingUtilitiesSales salariesGeneral office expenses-otherGeneral office salariesStore management salariesStore rent
(Click to select)General advertisingStore management salariesUtilitiesStore rentDirect advertisingDelivery salariesSales salariesInsurance on inventoriesGeneral office expenses-otherGeneral office salariesEmployment taxes
(Click to select)UtilitiesGeneral office salariesGeneral advertisingSales salariesStore management salariesDelivery salariesGeneral office expenses-otherDirect advertisingStore rentInsurance on inventoriesEmployment taxes
(Click to select)Employment taxesDirect advertisingUtilitiesDelivery salariesStore rentGeneral office salariesStore management salariesGeneral office expenses-otherSales salariesInsurance on inventoriesGeneral advertising
(Click to select)Decrease in company net operating incomeIncrease in company net operating income		$

2.

Based on your computations in (1) above, what recommendation would you make to the management of Thrifty Markets, Inc.?

	The Downtown Store should not be closed.
	The Downtown Store should be closed.

3.	Assume that if the Downtown Store were closed, sales in the Uptown Store would increase by $400,000 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. (Round your intermediate and final answers to the nearest dollar amount.)

Net advantage of closing the Downtown Store

$

b.

What recommendation would you make to the management of Thrifty Markets, Inc.?

	The Downtown Store should be closed.
	The Downtown Store should not be closed.