Superior Markets, Inc., operates three stores in a large metropolitan area. A se

Question

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 uuI Store Sales Cost of goods sold Gross margin Selling and administrative expenses: $3,800,000 $760,000 $1,520,000 $1,520,000 836,000 684,000 2,090,000 1,710,000 420,000 340,000 834,000 686,000 Selling expenses Administrative expenses 833,000 239,400 114,000 353,400 $454,000 (13,400) 319,000 162,900 481,900 204,100 274,600 146,1060 420,700 263,300 423,000 1,256,000 Total expenses Net operating income (loss) 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 that are shown above is as follows North Store Store Store Selling expenses: Sales salaries Direct advertising General advertising* Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery $248,200 173,000 59,000 $87,800 $101,400 34,000 22,800 97,000 59,000 80,000 300,000 20,000 93,000 110,000 equipment Total selling expenses $833,000 239,400 $319,000 $274,600 Allocated on the basis of sales dollars North Store Store Store Administrative expenses: $ 82,000 25,000 34,000 Store managers' salaries General office salaries Insurance on fixtures and inventory Utilities Employment taxes General office-other* 23,000 22,800 28,950 38,000 57,000 33,220 95,000 $423,000 19,000 ?114,000 38,000 162,900 Total administrative expenses 146, 100 Allocated on the basis of sales dollars

Explanation / Answer

1. How much Empoyee Salaries will the company avoide if it closes the north store Particulars Amount Sales Manager Salary $ 25,000.00 Sales Salaries $ 59,000.00 Delivary Salaries $    7,800.00 Total $ 91,800.00 2. How much Employement taxes will the company avoide if it closes North Store Particulars Amount Employee Taxes $ 15,480.00 Total $ 15,480.00 3. What is financial advantage / dis advantage of closing north store Advantage In the given case north store is running in loss of $ 13.400 as it is not performing well it is better to close the store and hence it inceses the financial stability of firm and Firm further can concerate on the profitable stores and increse their revenue and hence the decition taken by the firm is is the best option Financial Disadvanjtage The Entity is going to loose the market and sales in North store 5 Alternative One if the Sales of East division increses by 1/3 rd sales of North division then the recenve of the firm increase which is an advantage for the entity Alternative Two If East store has enough capacity to handle the increased sales and would arise from the colsing of north store is an advantage and helps in increasing the revenue Alternative Three If increse In sales in east in East Stores would Yeild the same % of sales in the North division as of East division then it is neither advantage nor disadvantage

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

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