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:

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 $7,000 per month, or $21,000 per quarter. If the store were not closed, a new employee would be hired to fill the other position at a salary of $6,000 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 $6,000 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.

Based on your computations in (1) above, 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.

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 45% of sales.

a.

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

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.

Thrifty Markets, Inc., operates three stores in a large metropolitan area. The company½s segmented absorption costing income statement for the last quarter is given below: Management is very concerned about the Downtown Store½s 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 $7,000 per month, or $21,000 per quarter. If the store were not closed, a new employee would be hired to fill the other position at a salary of $6,000 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 company½s 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 person½s 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 Store½s 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 employee½s compensation amounts to $6,000 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.Based on your computations in (1) above, 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.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 45% of sales.a.Calculate the Net advantage of closing the Downtown Store. (Any reductions or outflows should be indicated by a minus sign.)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. Thrifty Markets, Inc., operates three stores in a large metropolitan area. The company½s segmented absorption costing income statement for the last quarter is given below: Management is very concerned about the Downtown Store½s 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 $7,000 per month, or $21,000 per quarter. If the store were not closed, a new employee would be hired to fill the other position at a salary of $6,000 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 company½s 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 person½s 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 Store½s 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 employee½s compensation amounts to $6,000 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.Based on your computations in (1) above, 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.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 45% of sales.a.Calculate the Net advantage of closing the Downtown Store. (Any reductions or outflows should be indicated by a minus sign.)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