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Thrifty Markets, Inc., operates three stores in a large metropolitan area. The companys segmented absorption costing income statement for the last quarter is given below:

Thrifty Markets, Inc. Income Statement For the Quarter Ended March 31
	Total			Uptown Store			Downtown Store			Westpark Store
Sales	$	2,700,000		$	1,000,000		$	600,000		$	1,100,000
Cost of goods sold		1,453,000			530,000			359,000			564,000
Gross margin		1,247,000			470,000			241,000			536,000
Selling and administrative expenses:
Selling expenses:
Direct advertising		117,300			34,000			41,000			42,300
General advertising*		16,000			5,926			3,556			6,518
Sales salaries		154,000			48,000			42,000			64,000
Delivery salaries		30,000			10,000			10,000			10,000
Store rent		202,000			67,000			63,000			72,000
Depreciation of store fixtures		46,660			18,300			8,500			19,860
Depreciation of delivery equipment		27,000			9,000			9,000			9,000
Total selling expenses		592,960			192,226			177,056			223,678
Administrative expenses:
Store management salaries		64,000			22,000			15,000			27,000
General office salaries*		47,000			17,407			10,444			19,149
Utilities		88,600			29,000			30,000			29,600
Insurance on fixtures and inventory		24,300			7,600			8,600			8,100
Employment taxes		38,200			11,800			12,800			13,600
General office expensesother*		24,000			8,889			5,333			9,778
Total administrative expenses		286,100			96,696			82,177			107,227
Total operating expenses		879,060			288,922			259,233			330,905
Net operating income (loss)	$	367,940		$	181,078		$	(18,233	)	$	205,095

*Allocated on the basis of sales dollars.

Management is very concerned about the Downtown Stores inability to show a profit, and consideration is being given to closing the store. The company has asked you to make a recommendation as to what course of action should be taken. The following additional information is available about the store:

a.	The manager of the store has been with the company for many years; he would be retained and transferred to another position in the company if the store were closed. His salary is $5,000 per month, or $15,000 per quarter. If the store were not closed, a new employee would be hired to fill the other position at a salary of $4,000 per month.
b.	The lease on the building housing the Downtown Store can be broken with no penalty.
c.	The fixtures being used in the Downtown Store would be transferred to the other two stores if the Downtown Store were closed.
d.	The companys employment taxes are 11% of salaries.
e.	A single delivery crew serves all three stores. One delivery person could be discharged if the Downtown Store were closed; this persons salary amounts to $7,500 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but it does eventually become obsolete.
f.	One-third of the Downtown Stores insurance relates to its fixtures.
g.	The general office salaries and other expenses relate to the general management of Thrifty Markets, Inc. The employee in the general office who is responsible for the Downtown Store would be discharged if the store were closed. This employees compensation amounts to $9,000 per quarter.

Required:
1.	Prepare a schedule showing the change in revenues and expenses and the impact on the overall company net operating income that would result if the Downtown Store were closed. (Input all amounts as positive values. Do not round your intermediate calculations. Round your final answers to the nearest dollar amount.)

Thrifty Markets, Inc. Schedule showing the change in revenues and expenses For the Quarter Ended March 31
(Click to select)Gross margin gained if the store is closedGross margin lost if the store is closed		$
Less costs that can be avoided:
(Click to select)UtilitiesGeneral office salariesGeneral office expenses-otherStore management salariesDirect advertisingInsurance on inventoriesDelivery salariesEmployment taxesSales salariesGeneral advertisingStore rent	$
(Click to select)Insurance on inventoriesGeneral office expenses-otherGeneral advertisingDelivery salariesStore management salariesEmployment taxesDirect advertisingStore rentGeneral office salariesUtilitiesSales salaries
(Click to select)Direct advertisingEmployment taxesUtilitiesGeneral advertisingDelivery salariesGeneral office salariesGeneral office expenses-otherSales salariesStore management salariesInsurance on inventoriesStore rent
(Click to select)Direct advertisingUtilitiesEmployment taxesGeneral office salariesGeneral office expenses-otherStore management salariesDelivery salariesSales salariesInsurance on inventoriesStore rentGeneral advertising
(Click to select)Store management salariesGeneral office expenses-otherDelivery salariesInsurance on inventoriesGeneral advertisingDirect advertisingEmployment taxesUtilitiesGeneral office salariesStore rentSales salaries
(Click to select)Employment taxesUtilitiesGeneral advertisingSales salariesGeneral office expenses-otherGeneral office salariesStore rentDirect advertisingInsurance on inventoriesDelivery salariesStore management salaries
(Click to select)Delivery salariesStore management salariesUtilitiesStore rentEmployment taxesDirect advertisingGeneral advertisingSales salariesGeneral office expenses-otherGeneral office salariesInsurance on inventories
(Click to select)Employment taxesSales salariesUtilitiesGeneral advertisingGeneral office salariesStore management salariesInsurance on inventoriesGeneral office expenses-otherDelivery salariesDirect advertisingStore rent
(Click to select)Store management salariesGeneral advertisingDirect advertisingStore rentInsurance on inventoriesGeneral office salariesGeneral office expenses-otherUtilitiesSales salariesEmployment taxesDelivery salaries
(Click to select)Increase in company net operating incomeDecrease in company net operating income		$

2.	Based on your computations in (1) above, what recommendation would you make to the management of Thrifty Markets, Inc.?
	The Downtown Store should not be closed. The Downtown Store should be closed.

3.	Assume that if the Downtown Store were closed, sales in the Uptown Store would increase by $500,000 per quarter due to loyal customers shifting their buying to the Uptown Store. The Uptown Store has ample capacity to handle the increased sales, and its gross margin is 47% of sales.

a.	Calculate the Net advantage of closing the Downtown Store. (Round your intermediate and final answers to the nearest dollar amount.)

Net advantage of closing the Downtown Store

$

b.	What recommendation would you make to the management of Thrifty Markets, Inc.?
	The Downtown Store should not be closed. The Downtown Store should be closed.

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