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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 30
	Total			North Store			South Store			East Store
Sales	$	4,800,000		$	960,000		$	1,920,000		$	1,920,000
Cost of goods sold		2,640,000			600,000			984,000			1,056,000
Gross margin		2,160,000			360,000			936,000			864,000
Selling and administrative expenses:
Selling expenses:		853,000			249,400			324,000			279,600
Administrative expenses		473,000			124,000			177,900			171,100
Total expenses		1,326,000			373,400			501,900			450,700
Net operating income (loss)	$	834,000		$	(13,400	)	$	434,100		$	413,300

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 is as follows:

	Total		North Store		South Store		East Store
Selling expenses:
Sales salaries	$	246,200	$	59,000	$	77,800	$	109,400
Direct advertising		183,000		69,000		90,000		24,000
General advertising*		72,000		14,400		28,800		28,800
Store rent		286,000		87,000		106,000		93,000
Depreciation of store fixtures		25,000		6,400		7,800		10,800
Delivery salaries		26,400		8,800		8,800		8,800
Depreciation of delivery equipment		14,400		4,800		4,800		4,800
Total selling expenses	$	853,000	$	249,400	$	324,000	$	279,600

*Allocated on the basis of sales dollars.

	Total		North Store		South Store		East Store
Administrative expenses:
Store management salaries	$	97,000	$	30,000	$	39,000	$	28,000
General office salaries*		72,000		14,400		28,800		28,800
Insurance on fixtures and inventory		43,000		12,900		18,000		12,100
Utilities		74,760		25,870		20,940		27,950
Employment taxes		66,240		16,830		23,160		26,250
General office other*		120,000		24,000		48,000		48,000
Total administrative expenses	$	473,000	$	124,000	$	177,900	$	171,100

*Allocated on the basis of sales dollars.

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 $13,400 per quarter. The general manager of the North Store would be retained at her normal salary of $14,400 per quarter. All other employees in the 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 persons salary is $5,800 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.
f.	The companys employment taxes are 15% of salaries.
g.	One-third of the insurance in the North Store is on the stores fixtures.
h.	The General office salaries and General officeother 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 persons compensation is $7,200 per quarter.

Required:
1.	Prepare a schedule showing the change in revenues and expenses and the impact on the companys overall net operating income that would result if the North Store were closed. (Any losses/ reductions should be indicated by a minus sign.)

3.

Assume that if the North Store were closed, at least one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. The East Store has enough capacity to handle the increased sales. You may assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in that store.

a.	Calculate the net advantage of closing the North Store. (Any reductions or outflows should be indicated by a minus sign.)

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