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	$	3,900,000		$	820,000		$	1,560,000		$	1,520,000
Cost of goods sold		2,145,000			480,000			829,000			836,000
Gross margin		1,755,000			340,000			731,000			684,000
Selling and administrative expenses:
Selling expenses		835,000			240,400			319,500			275,100
Administrative expenses		428,000			115,000			164,400			148,600
Total expenses		1,263,000			355,400			483,900			423,700
Net operating income (loss)	$	492,000		$	(15,400	)	$	247,100		$	260,300

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	$	241,600	$	56,800	$	85,400	$	99,400
Direct advertising		174,000		60,000		81,000		33,000
General advertising*		58,500		12,300		23,400		22,800
Store rent		305,000		94,000		111,000		100,000
Depreciation of store fixtures		20,500		5,500		6,900		8,100
Delivery salaries		23,700		7,900		7,900		7,900
Depreciation of delivery equipment		11,700		3,900		3,900		3,900
Total selling expenses	$	835,000	$	240,400	$	319,500	$	275,100

*Allocated on the basis of sales dollars.

	Total		North Store		South Store		East Store
Administrative expenses:
Store managers' salaries	$	83,500	$	25,500	$	34,500	$	23,500
General office salaries*		58,500		12,400		23,400		22,700
Insurance on fixtures and inventory		34,000		10,200		13,500		10,300
Utilities		93,405		31,010		31,320		31,075
Employment taxes		61,095		15,390		22,680		23,025
General office—other*		97,500		20,500		39,000		38,000
Total administrative expenses	$	428,000	$	115,000	$	164,400	$	148,600

*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 $11,400 perquarter. The general manager of the North Store would continue toearn her normal salary of $12,400 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 $4,900 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 $6,200 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?