This is the second submission of the same question. The first response was wrong

Question

This is the second submission of the same question. The first response was wrong.

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 Store South Store East Store Total $3,840,000 $1,000,000 $1,480,000 $1,360,000 Sales Cost of goods sold 2,122,000 560,000 814,000 748,000 Gross margin 1,718,000 440,000 666,000 612,000 Selling and administrative expenses Selling expenses Administrative expenses 1,084,400 562,220 321,000 162,800 403,200 212,340 360,200 187,080 Total expenses 1,646,620 483,800 615,540 547,280 Net operating income (loss) S 71,380 S (43,800) S 50,460 S 64,720 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 vour use

Explanation / Answer

Answer 1. Gross Margin if the Store is Closed (440,000.00) Costs that can be Avoided: Sales Salaries        98,000.00 Direct Advertising        65,000.00 Store Rent        99,000.00 Delivery Salaries        18,000.00 Store Mangement Salaries ($35,000 - $20,000)        15,000.00 Salary of New Manager        19,000.00 General Office Salaries        10,000.00 Insurance on Inventories - $11,700 X 2/3          7,800.00 Utilities        45,000.00 Employment Taxes        24,000.00 Total Costs can be Avoided     400,800.00 Increase (Decrease) in Company Profits if North Store is Closed     (39,200.00) Answer 2. The North Store Should not be Closed Answer 3-a. Gross Margin Lost if the North Store is Closed (440,000.00) Gross Margin Gained from the East Store     112,500.00 Net Operating (Loss) in Gross Margin (327,500.00) Less: Costs can be Avoided if North Store is Closed     400,800.00 Net Profit (loss) on Closing of North Store        73,300.00 Answer 3-b. The North Store Should be Closed

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