Superior Markets Superior Markets, Inc., operates three stores in a large metrop

Question

Superior Markets

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 North $3,700,000 $800,000 $1,480,000 $1,420,000 781,000 Cost of goods sold 2,035,000 460,000 794,000 Gross margin 1,665,000 340,000 686,000 639,000 Selling and administrative expenses Selling expenses Administrative expenses 831.000 238.400 418,000 113,000 318.500 161.400 274.100 143,600 Total expenses 1,249,000 351,400 479,900 417,700 Net operating income (loss) $ 416,000 $(11,400) $ 206,100 $ 221,300 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 North re re re Selling expenses Sales salaries Direct advertising General advertising* Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery equipment $214,800 59,700 72,200 $ 82,900 35.000 55,500 12,000 22,200 21,300 335,000 92,000 127,000 116,000 7.500 7.700 172,000 58,000 79.000 19,500 23.100 11,100 5.300 7.700 6.700 7.700 Total selling expenses $831,000 $238,400 $318,500 $274,100 Allocated on the basis of sales dollars re Administrative expenses Store management salaries General office salaries Insurance on fixtures and inventory Utilities Employment taxes General office-other* $80,500 $ 24,500 $ 33,500 $ 22,500 55,500 12,000 22,200 21,300 9.900 34,240 20,160 92,500 20,000 37,000 35,500 9.600 2.500 101,415 31.315 35,860 32.000 56.085 15.585 20,340 Total administrative expenses $418,000 $113,000 $161,400 $143,600 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 $11,000 per quarter. The general manager of the North Store would be retained at her normal salary of $12,000 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 person's salary is $4,700 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 company's employment taxes are 15% of salaries g. One-third of the insurance in the North Store is on the store's fixtures h. The "General office salaries and "General office-other 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 person's compensation is $6,000 per quarter

Explanation / Answer

Cost can be avoided when north store closed Amount Amount Remarks Selling expenses sales salaries $        59,700.00 Can be avoided as directly related to stores Direct advertising $        58,000.00 Can be avoided as directly related to stores Store rent $        92,000.00 As lease can be broken with no penalty Depreciation of store fixures $          5,300.00 As fixures & fittings has been transferred to other stores Delivery salaries $          4,700.00 Can be avoided as directly related to stores Dep of delivery equipment $          3,700.00 As equipment has been transferred to other stores Admin Expenses $           223,400 Store management salaries $        12,500.00 Salaries to other store employees can be avoided but general manager of store would be retained by paying salary of $12,000/- per quarter. Insurance on fixures and inventory & utilities $        10,438.33 31315*1/3 Employment taxes $          1,875.00 12500*15% $             24,813 Total $           248,213

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.