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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		1,483,000			560,000			359,000			564,000
Gross margin		1,217,000			440,000			241,000			536,000
Selling and administrative expenses:
Selling expenses:
Direct advertising		115,000			30,000			42,000			43,000
General advertising*		15,000			5,556			3,333			6,111
Sales salaries		153,000			50,000			42,000			61,000
Delivery salaries		42,000			14,000			14,000			14,000
Store rent		208,000			66,000			63,000			79,000
Depreciation of store fixtures		46,040			17,600			8,600			19,840
Depreciation of delivery equipment		21,000			7,000			7,000			7,000
Total selling expenses		600,040			190,156			179,933			229,951
Administrative expenses:
Store management salaries		69,000			20,000			24,000			25,000
General office salaries*		45,000			16,667			10,000			18,333
Utilities		92,600			31,000			30,000			31,600
Insurance on fixtures and inventory		23,700			7,400			8,400			7,900
Employment taxes		36,800			11,100			12,300			13,400
General office expensesother*		21,000			7,778			4,667			8,555
Total administrative expenses		288,100			93,945			89,367			104,788
Total operating expenses		888,140			284,101			269,300			334,739
Net operating income (loss)	$	328,860		$	155,899		$	(28,300	)	$	201,261

*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 $8,000 per month, or $24,000 per quarter. If the store were not closed, a new employee would be hired to fill the other position at a salary of $7,000 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 12% 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 $9,500 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. 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 $300,000 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 44% of sales. a. Calculate the Net advantage of closing the Downtown Store. (Any reductions or outflows should be indicated by a minus sign.) b. What recommendation would you make to the management of Thrifty Markets, Inc.? The Downtown Store should be closed. The Downtown Store should not be closed.

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