Superior Markets, Inc., operates three stores in a largemetropolitan area. A segmented absorption costing income statementfor the company for the last quarter is given below:

Superior Markets, Inc. Income Statement For the Quarter Ended September 30
	Total			North Store			South Store			East Store
Sales	$	5,000,000		$	960,000		$	2,000,000		$	2,040,000
Cost of goods sold		2,750,000			600,000			1,028,000			1,122,000
Gross margin		2,250,000			360,000			972,000			918,000
Selling and administrative expenses:
Selling expenses		857,000			251,400			325,000			280,600
Administrative expenses		483,000			126,000			180,900			176,100
Total expenses		1,340,000			377,400			505,900			456,700
Net operating income (loss)	$	910,000		$	(17,400	)	$	466,100		$	461,300

The North Store has consistently shown losses over the past twoyears. For this reason, management is giving consideration toclosing the store. The company has asked you to make arecommendation as to whether the store should be closed or keptopen. The following additional information is available for youruse:

1. The breakdown of the selling and administrative expenses thatare shown above is as follows:

	Total		North Store		South Store		East Store
Selling expenses:
Sales salaries	$	246,000	$	64,400	$	73,000	$	108,600
Direct advertising		185,000		71,000		92,000		22,000
General advertising*		75,000		14,400		30,000		30,600
Store rent		283,000		81,000		108,000		94,000
Depreciation of store fixtures		26,000		6,600		8,000		11,400
Delivery salaries		27,000		9,000		9,000		9,000
Depreciation of delivery equipment		15,000		5,000		5,000		5,000
Total selling expenses	$	857,000	$	251,400	$	325,000	$	280,600

*Allocated on the basis of sales dollars.

	Total		North Store		South Store		East Store
Administrative expenses:
Store managers' salaries	$	100,000	$	31,000	$	40,000	$	29,000
General office salaries*		75,000		14,400		30,000		30,600
Insurance on fixtures and inventory		45,000		13,500		19,000		12,500
Utilities		70,800		25,280		19,100		26,420
Employment taxes		67,200		17,820		22,800		26,580
General office—other*		125,000		24,000		50,000		51,000
Total administrative expenses	$	483,000	$	126,000	$	180,900	$	176,100

*Allocated on the basis of sales dollars.

2. The lease on the building housing the North Store can be brokenwith no penalty.

3. The fixtures being used in the North Store would be transferredto the other two stores if the North Store were closed.

4. The general manager of the North Store would be retained andtransferred to another position in the company if the North Storewere closed. She would be filling a position that would otherwisebe filled by hiring a new employee at a salary of $13,400 perquarter. The general manager of the North Store would continue toearn her normal salary of $14,400 per quarter. All other managersand employees in the North store would be discharged.

5. The company has one delivery crew that serves all three stores.One delivery person could be discharged if the North Store wereclosed. This person’s salary is $6,000 per quarter. The deliveryequipment would be distributed to the other stores. The equipmentdoes not wear out through use, but does eventually becomeobsolete.

6. The company pays employment taxes equal to 15% of theiremployees' salaries.

7. One-third of the insurance in the North Store is on the store’sfixtures.

8. The “General office salaries” and “General office—other” relateto the overall management of Superior Markets, Inc. If the NorthStore were closed, one person in the general office could bedischarged because of the decrease in overall workload. Thisperson’s compensation is $7,200 per quarter.

Required:

1. How much employee salaries will the company avoid if itcloses the North Store?

2. How much employment taxes will the company avoid if it closesthe North Store?

3. What is the financial advantage (disadvantage) of closing theNorth Store?

4. Assuming that the North Store's floor space can’t besubleased, would you recommend closing the North Store?

5. Assume that the North Store's floor space can’t be subleased.However, let's introduce three more assumptions. First, assume thatif the North Store were closed, one-fourth of its sales wouldtransfer to the East Store, due to strong customer loyalty toSuperior Markets. Second, assume that the East Store has enoughcapacity to handle the increased sales that would arise fromclosing the North Store. Third, assume that the increased sales inthe East Store would yield the same gross margin as a percentage ofsales as present sales in the East store. Given these newassumptions, what is the financial advantage (disadvantage) ofclosing the North Store?