Thrifty Markets, Inc., operates three stores in a large metropolitan area. The c

Question

Thrifty Markets, Inc., operates three stores in a large metropolitan area. The company's segmented absorption costing income statement for the last quarter is given below: Thrifty Markets, Inc. Income Statement For the Quarter Ended March 31 Downtown Uptown Store Westpark Total 1,448,000 1,252,000 Store 358,000 470,000 242,000 Store 560,000 540,000 Sales $2,700,000 $1,000,000 $600,000 $1,100,000 Cost of goods sold Gross margin Selling and administrative expenses: 530,000 Selling expenses: Direct advertising General advertising* Sales salaries Delivery salaries Store rent Depreciation of store fixtures Depreciation of delivery equipment 20,000 155,000 36,000 203,000 46,340 30,000 40,000 7,407 50,000 12,000 69,000 17,800 10,000 42,000 4,444 42,000 12,000 63,000 8,700 10,000 63,000 12,000 71,000 10,000 Total selling expenses 614,440 206,207 226,089 Administrative expenses: Store management salaries General office salaries* Utilities Insurance on fixtures and inventory Employment taxes General office expenses-other* 70,000 45,000 94,600 24,000 36,700 21,000 22,000 16,667 32,000 7,500 11,300 7,778 21,000 10,000 30,000 8,500 12,000 4,667 27,000 18,333 32,600 8,000 13,400 8,555 86,167 268,311 166,548 $ (26,311) $ 206,023 107,888 Total administrative expenses Total operating expenses Net operating income (loss) 291,300 905,740 $ 346,260 97,245 303,452 333,977 Allocated on the basis of sales dollars,

Explanation / Answer

Other expenses are not considered as they still exist incompany because those were transferred to other store.

Further , others are just allocation of epense of company as whole ex,General expenses other, or general advertisemnet .

in Continuing store we will emplo one more sales staff at 6000 per month or 18000 per quarter. this amount is added to sales salaries

Gross Margin lost 242000 Less : cost avoided - Direct advirtisement 42000 Sales salaries = 42000 + 18000 ( new employyee to be hired) 60000 Delivery salaries 8500 Store rent 63000 General office salary 10000 Utilities 30000 Insurance inventory ( 8500 x 2/3) 5667 Employment tax 13 % on ( 60000+8500+10000) 10205 Decrease in companies net operating income 12628

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