All answers shown are correct. Superio Markets, Inc operates three stores in a l

Question

All answers shown are correct.

Superio 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. ncome Statement For the Quarter Ended September 3D East North Stcre South Slore Talal Sales Cost of goods sold ross mmargin Selling and administrative expenses Selling expenses Administrative expenses Total expenses Net operating income (loss) $4 600,00D $920,000 $1,840,000 $1,84D,000 2.530,000 565.000 953,000 012,000 -19,000 247.400 463,000 323,000 270,600 444,700 758,0DD (14.400) 389,100 383,300 1.312,00D 369.400 497.900 to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or The North Store has consistently shown losses over the past two years. For this reason, management is givingo kept open. The following additional n is available for your use: a. The breakdown of the selling and administrative expenses is as follows. Narth East Selling expenses: Sales salaries Direct advertising S 230.400 62,200 67,000 13,800 85,000 6,200 8,600 181,000 69.000 305 000 24.000 25.900 3,000 27,600 118.00D 7,600 68,600 S 99600 25,000 27 600 102 000 10.200 9.600 Stere rent Depreciation of store foxtures Delivery salaries Depreciation of delivery equipment Total selling expenses S 849 000 247,400 $ 323,000 S 278,600 Allocated on the basis of sales dollars. East Total Store Administrative expenses 30,000 27 600 17,000 24,880 21,420 46,000 Store management salaries General office salaries 5 94.000 29,000 13,800 12,300 26,860 17,040 59 000 41.000 81,120 62 880 115,000 27.000 27 600 11,700 29,380 24.420 Insurance on fxtures and inventory taxes General office-other Total administrative expanses 463,000 122,000 $174,900 S 166,100 Allocated on the basis of sales dollars

Explanation / Answer

1

Workings:

2. The North Store should not be closed

3.

Workings:

4.

The North Store should be closed

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Gross margin lost if the store is closed $   (355,000.00) Costs that can be avoided: Sales salaries $    62,200.00 Direct advertising $    67,000.00 Store rent $    85,000.00 Delivery salaries $      5,600.00 Store management salaries(29000-13800) $    15,200.00 Salary of new manager $    12,800.00 General office compensation $      6,900.00 Insurance on inventories(12300*2/3) $      8,200.00 Utilities $    26,860.00 Employment taxes(102,700*15%) $    15,405.00 Total Cost that can be avoided $      305,165.00 Decrease in company profits if the North Store is closed $      (49,835.00)

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