Superior Markets, Incorporated, operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below: Sales Cost of goods sold. Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total expenses Net operating income (loss) Selling expenses: Sales salaries Direct advertising General advertising Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery equipment Total selling expenses *Allocated on the basis of sales dollars. Superior Markets, Incorporated Income Statement For the Quarter Ended September 30 Administrative expenses: Store managers salaries General office salaries Insurance on fixtures and inventory Utilities Employment taxes General office-other* Total $3,000,000 1,657,200 1,342,800 Total administrative expenses *Allocated on the basis of sales dollars. 817,000 383,000 1,200,000 $ 142,800 a. The breakdown of the selling and administrative expenses that are shown above is as follows: 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: Total $ 239,000 187,000 45,000 300,000 16,000 21,000 9,000 $ 817,000 North Store $ 720,000 403,200 316,800 Total 231,400 106,000 337,400 $ (20,600) $ 70,000 50,000 25,000 106,000 57,000 75,000 $ 383,000 North Store $ 70,000 51,000 10,800 85,000 4,600 7,000 3,000 $ 231,400 North Store $ 21,000 12,000 7,500 31,000 South Store $ 1,200,000 660,000 540,000 16,500 18,000 $ 106,000 315,000 150,900 465,900 $ 74,100 f. 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. South Store $ 89,000 72,000 18,000 120,000 6,000 7,000 3,000 $ 315,000 South Store $ 30,000 20,000 East Store. $ 1,080,000 594,000 486,000 9,000 40,000 21,900 30,000 $ 150,900 270,600 126,100 396,700 $ 89,300 East Store $ 80,000 64,000 16,200 95,000 5,400 7,000 3,000 $ 270,600 East Store $ 19,000 18,000 8,500 35,000 18,600 27,000 $ 126,100 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 $11,000 per quarter. The general manager of the North Store would continue to earn her normal salary of $12,000 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 $4.000 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. h. The "General office salaries" and "General office-other" relate to the overall management of Superior Markets, Incorporated. 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 $6,000 per quarter.