Superior Markets, Inc., 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, Inc. Income Statement For the Quarter Ended September 38 North South Total Store Store Sales $4,500,000 $900.eee $1,800,000 Cost of goods sold 2,475,000 550, 935,000 Gross margin 2,025,000 350,000 865, eee Selling and administrative expenses: Selling expenses 847.000 246,400 322,500 Administrative expenses 458.000 121.000 173,400 Total expenses 1,385,000 367,480 495,980 Net operating income (loss) $ 720,eee $(17,480) $ 369,100 East Store $1.see, eae 990.099 10, eee 278,109 163,609 441,700 368,300 $ 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: North Store South Store East Store Total Selling expenses: Sales salaries Direct advertising General advertising Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery equipment Total selling expenses $237,000 180,000 67,500 300.000 23,500 25,500 13,500 5847,000 $ 63,800 66,000 13,500 84.000 6,100 8,500 4,500 $246,400 $ 71,000 87.000 27.000 17.000 7,500 8.500 4,500 $322,500 $102,200 27.000 27,000 99,000 9,900 8,500 4,500 $278,100 "Allocated on the basis of sales dollars. v North South Store East Total 3.32 Administrative expenses: Store managers' salaries General office salaries Insurance on fixtures and inventory Utilities Employment taxes General office other Total administrative expenses $ 92,500 67, See 40,000 82.125 63.375 112, See 5458,000 $ 28,509 14.000 12, 26.739 17,220 22,500 $121,0 5 37,500 27.000 16,500 25, see 21,609 45,000 $123,49 26,5ea 26,500 11.50 29,545 24,555 45.ee $163,600 eBook 'Allocated on the basis of sales dollars. . Print to 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 $13,000 per quarter. The general manager of the North Store would continue to earn her normal salary of $14,000 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 $5,500 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. 1. 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, Inc. 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 $7,000 per quarter Required: 1. How much employee salaries will the company avoid if it closes the North Store? 2. How much employment taxes will the company avoid if it closes the North Store? 3. What is the financial advantage (disadvantage) of closing the North Store? 4. Assuming that the North Store's floor space can't be subleased, 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 that if the North Store were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from closing the North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 How much employee salaries will the company avoid if it closes the North Store? Employee salaries Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 How much employment taxes will the company avoid if it closes the North Store? Employment taxes Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 What is the financial advantage (disadvantage) of closing the North Store? (Enter any "disadvantages" as a negative va Financial advantage (disadvantage) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Assume that the North Store's floor space can't be subleased. However, let's Introduce three more assumptions. First assume that if the North Store were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from closing the North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store? (Enter any "disadvantages" as a negative value.) Show less Financial advantage (disadvantage) (Required 4 Required 5