2-Close or Retain a StoreSuperior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement ofthe company for the last quarter is given below:Superior Markets, Inc.Income StatementFor the Quarter Ended June 30NorthSouthEastDistrict$720,000403,200TotalDistrictDistrict$3,000,0001,657,200Sales$1,200,000$1,080,000Cost of goods sold660,000594,000Gross marginExpensesSelling expenses1,342,800316,800540,000486,000817,000383,000231,400106,000315,000150,900270,600Administrative126,100Total expenses1,200,000337,400465,900396,700Net income (loss)$142,800$ (20,600)$74,100$89,300The store located in the North District has consistently shown losses over the past two years. For this reason, management isconsidering to closed the store. The company has asked you to make a recommendation as to whether the store should beclosed or kept open. The following additional information is available for your use:a.The breakdown of the selling and administrative expenses is as follows:Selling expensesTotalNorthSouthEast$239,000187,00045,000$89,00072,00018,000$70,000$80,00064,00016,20095,000Sales salariesDirect advertisingGeneral advertising***Store rent51,00010,800300,00085,000120,000Depreciation6,0003,000Store FixturesDelivery equipmentDelivery salaries16,0009,00021,0004,6003,0007,0005,4003,0007,0007,000Total Selling expenses$817,000$231,400$315,000$270,600Total$70,00050,00025,000106,00057,000AdministrativeNorthSouthEastStore management salaries$30,00020,0009,00040,00021,90030,000$19,00018,0008,50035,00018,60027,000$21,00012,0007,500General office salaries ***Insurance on fixtures and inventoryUtilities31,000Employment taxesGeneral office - other***16,50075,00018,000Total administrative$383,000$106,000$150,900$126,100***Allocated on the basis of sales dollarsThe lease of the building housing the North store can be broken with no penalty.The fixtures being used in the North store would be transferred to the other two stores if the North store were closed.The general manager of the North store would be retained and transferred to another position in the company of theNorth store were closed. She would be filling a position that would otherwise be filed by hiring a new employee at asalary 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.The company has one delivery crew that serves all three stores. One delivery person could be discharged if the Northstore were closed. This persor's salary is $4,000 per quarter. The delivery equipment would be distributed to the otherstores. The equipment does not wear out through use, but does eventually become obsolete.The company's employment taxes are 15% of salaries.q. 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. Ifthe North store were closed, one person in the general office could be discharged because of the decrease in overallworkload. This person's compensation is 6,000 per quarter.b.C.d.e.f.Required:1. Prepare a schedule showing the change in revenues and expenses and the impact on the company's overall netoperating income that would result if the North store were closed.2. Assuming that the store can't be subleased, what recommendation would you make to the management of SuperiorMarkets, Inc.?3. Disregard requirement 2. Assume that if the North store were closed, at least one-fourth of its sales would transfer tothe East store due to strong customer loyalty to Superior Markets. The East store has enough capacity to handle theincreased sales. You may assume that the increased sales in the East store would yield the same gross margin as apercentage of sales as present sales in that store. What effect would these factors have on your recommendationconcerning the North store?4. Show all computations to support your answer.

Answer 1) Particulars Amount Amount Gross Margin lost if the store is closed $(316,800)…

perior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement of = company for the last quarter is given below: Superior Markets, Inc. Income Statement For the Quarter Ended June 30 North South East District $720,000 403,200 Total District $1,200,000 660,000 District Sales Cost of goods sold $3,000,000 1,657,200 $1,080,000 594,000 Gross margin 1,342,800 316,800 540,000 486,000

perior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement of = company for the last quarter is given below: Superior Markets, Inc. Income Statement For the Quarter Ended June 30 North South East District $720,000 403,200 Total District $1,200,000 660,000 District Sales Cost of goods sold $3,000,000 1,657,200 $1,080,000 594,000 Gross margin 1,342,800 316,800 540,000 486,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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