Superior Markets, Incorporated, operates three stores in a large metropolitan area. A segmented absorption costingincome statement for the company for the last quarter is given below:SalesCost of goods soldGross marginSelling and administrative expenses:Selling expensesAdministrative expensesTotal expensesNet operating income (loss)Selling expenses:Sales salariesDirect advertisingGeneral advertising*Store rentDepreciation of store fixturesDelivery salariesDepreciation of delivery equipmentTotal selling expensesSuperior Markets, IncorporatedIncome StatementFor the Quarter Ended September 30Total$ 3,240,0001,789,7761,450,224Administrative expenses:Store managers' salariesGeneral office salaries*Insurance on fixtures and inventoryUtilitiesEmployment taxesGeneral office-other*882,360413,6401,296,000$ 154,224Total administrative expenses*Allocated on the basis of sales dollars.a. The breakdown of the selling and administrative expenses that are shown above is as follows:The North Store has consistently shown losses over the past two years. For this reason, management is givingconsideration to closing the store. The company has asked you to make a recommendation as to whether the storeshould be closed or kept open. The following additional information is available for your use:Total$ 258, 120201,96048,600324,00017,28022,6809,720$ 882,360North Store$ 777,600435,456342,144Total249,912114,480364, 392$ (22,248)$ 75,60054,00027,000114,48061,56081,000$ 413,640South Store$ 1,296,000712,800583,200340,200162,972503,172$ 80,028North StoreNorth Store South Store$75,60055,08011,66491,8004,9687,5603,240$ 249,912$ 22,68012,9608,10033,48017,82019,440$ 114,480$ 96,12077,76019,440129,6006,4807,5603,240$ 340,200South StoreEast Store$ 1,166,400641,520524,880$ 32,40021,6009,72043,20023,65232,400$ 162,972292,248136,188428,436$ 96,444East Store$ 86,40069,12017,496102,6005,8327,5603,240$ 292,248East Store$ 20,52019,4409,18037,80020,08829,160$ 136,188b. 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 wereclosed.d. The general manager of the North Store would be retained and transferred to another position in the company if theNorth Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at asalary of $11,880 per quarter. The general manager of the North Store would continue to earn her normal salary of$12,960 per quarter. All other managers and employees in the North store would be discharged.e. The company has one delivery crew that serves all three stores. One delivery person could be discharged if theNorth Store were closed. This person's salary is $4,320 per quarter. The delivery equipment would be distributed tothe other stores. The equipment does not wear out through use, but does eventually become obsolete.f. The company pays employment taxes equal to 15% of their employees' 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,Incorporated If the North Store were closed, one person in the general office could be discharged because of thedecrease in overall workload. This person's compensation is $6,480 per quarter. Required:1. How much employee salaries will the company avoid if it closes the North Store?2. How much employment taxes will the company avoid if it closes the North Store?3. What is the financial advantage (disadvantage) of closing the North Store?4. Assuming that the North Store's floor space can't be subleased, would you recommend closing the North Store?5. Assume that the North Store's floor space can't be subleased. However, let's introduce three more assumptions.First, assume that if the North Store were closed, one-fourth of its sales would transfer to the East Store, due to strongcustomer loyalty to Superior Markets. Second, assume that the East Store has enough capacity to handle the increasedsales that would arise from closing the North Store. Third, assume that the increased sales in the East Store would yieldthe same gross margin as a percentage of sales as present sales in the East store. Given these new assumptions, whatis the financial advantage (disadvantage) of closing the North Store?Complete this question by entering your answers in the tabs below.Required 1 Required 2 Required 3 Required 4How much employee salaries will the company avoid if it closes the North Store?Employee salariesRequired 1 Required 2 Required 3What is the financial advantage (disadvantage) of closing the North Store? (Enter any "disadvantages" as a negative value.)Financial advantage (disadvantage)Required 1 Required 2Required 3Required 5Required 4Financial advantage (disadvantage)Required 5Required 4 Required 5Assume that the North Store's floor space can't be subleased. However, let's introduce three more assumptions. First, assumethat if the North Store were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty toSuperi Markets. Second, assum that the East Store has enough capacity to handle the increased sales that would arisefrom closing the North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as apercentage of sales as present sales in the East store. Given these new assumptions, what is the financial advantage(disadvantage) of closing the North Store? (Enter any "disadvantages" as a negative value.)Show less

Financial advantage { disadvantage } shows the net increase or decrease of operating profit due to…

Superior Markets, Incorporated, operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below: Sales Cost of goods sold Superior Markets, Incorporated Income Statement For the Quarter Ended September 30 Total $ 3,240,000 1,789,776 1.450 224 North Store $777,600 435,456 743 144 South Store $ 1,296,000 712,800 50 200 East Store $ 1,166,400 641,520 50.000

Superior Markets, Incorporated, operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below: Sales Cost of goods sold Superior Markets, Incorporated Income Statement For the Quarter Ended September 30 Total $ 3,240,000 1,789,776 1.450 224 North Store $777,600 435,456 743 144 South Store $ 1,296,000 712,800 50 200 East Store $ 1,166,400 641,520 50.000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Combe Corporation has two divisions: Alpha and Beta. Data from the most recent month appear below: Alpha Beta Sales $ 167,000 $ 362,300 Variable expenses $ 106,880 $ 166,300 Traceable fixed expenses $ 101,970 $ 120,900 The company’s common fixed expenses total $84,800. The break-even in sales dollars for Alpha Division is closest to: *MULTIPLE CHOICE: see image
The Reno Cafe's August and September 20X1 condensed income statements are as follows. Required: Using the condensed income statements for August and September of the Reno Cafe, prepare comparative condensed income statements. Show both dollar and percentage differences. August September Food Sales $45,000 $48,000 Beverage Sales 40,000 42,000 Total Sales 85,000 90,000 Cost of Food Sales 15,300 15,840 Cost of Beverage Sales 8,000 9,240 Labor 25,500 28,800 Laundry 4,000 4,200 China, Glass, Silver 1,000 1,100 Other 16,000 15,500 Income before Income Taxes 15,200 15,320 Income Taxes 2,280 2,298 Net Income $19,920 $13,022
Darby Company, operating at full capacity, sold 131,600 units at a price of $126 per unit during the current year. Its income statement is as follows: Sales $16,581,600 Cost of goods sold 5,880,000 Gross profit $10,701,600 Expenses: Selling expenses $2,940,000 Administrative expenses 1,764,000 Total expenses 4,704,000 Income from operations $5,997,600 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative expenses 30% 70% Management is considering a plant expansion program for the following year that will permit an increase of $1,386,000 in yearly sales. The expansion will increase fixed costs by $184,800, but will not affect the relationship between sales and variable costs. Required: Determine the total variable costs and the total fixed costs for the current year. Total variable costs $ fill in the blank 1 Total fixed costs $ fill in the blank 2 Determine (a) the unit…
Using the data below for the Ace Guitar Company: Sales Cost of goods sold Selling expenses Support department expenses: Purchasing Payroll accounting A Region A Region Operating Income B Region Operating Income $544,000 206,700 130,600 B Region $ $816,000 310,100 195,800 Allocate support department expenses proportional to the sales of each region. Determine the divisional operating income for the A and B regions. For interim calculations, round percentages to two decimal places and all other amounts to the nearest whole dollar. $228,500 152,300
Assets ($) 2019 2018 2017 Cash on Hand & at Banks 1844388 2907252 3696201 Accounts Receivable Net 21373839 27958818 23638244 Notes Receivable 0 0 0 Post Dated Cheques 7430502 5910795 5481999 Short Term Investments 111502 111502 0 Inventory 14772540 15359933 16127022 Total Current Assets 50764763 59355234 56162203 Long Term Investments 2247122 2305477 2346362 Fixed Assets Net 36960544 32892460 23018610 Lands 3338194 3344028 3364400 Projects in Progress 5544 4350057 10455510 Total Fixed Assets 40304282 40586545 36838520 Other Assets 6417935 6157108 5067638 Total Assets 99734102 108404364 100414723 Liabilities ($) 2019 2018 2017 Accounts and Notes Payable 9488026 9042459 6830212 Credit Banks 21176536 19278649 13508941 Short Term Loans 15347569 14306482 12568640 Accrued Part of Long Term Loans 3816788 3818532 3663256 Total Current Liabilities 63973817 67090416 44303485 Long Term Loans & Notes Payable 9883426 8547662 10299548 Other…
Fortunate Inc. is involved in retailing and has three profit centers classified as “East” and “West” and “South.” East Division sold 38,000 units during the year for a selling price of $25 each—These items cost $15 each and had $2.50 of variable selling expenses (sales commissions) that could be directly traced to the units. West Division sold 16,000 units during the year for a selling price of $27 each—These items cost $17 each and that had $3 of variable selling expenses (sales commissions) that could be directly traced to the units. South Division sold 42,000 units during the year for a selling price of $26 each—These items cost $16 each and had $2 of variable selling expenses (sales commissions) that could be directly traced to the units. Fixed Division Operating Costs that could be directly traced to the divisions were $160,000 for East Division and $95,000 for West Division, and $200,000 for South Division. There were $230,000 of Corporate Costs (which was $20,000 for…
Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Net operating income (loss) Fixed expenses Total $ 4,290,000 1,286,000 3,004,000 2,370,000 $ 634,000 Department Linens $ 1,190,000 418,000 772,000 880,000 Hardware $ 3,100,000 868,000 2,232,000 1,490,000 $ 742,000 $ (108,000) A study indicates that $377,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 13% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Financial (disadvantage) $ 390,100
Using the following data for Ace Guitar Company: A Region Sales Cost of goods sold Selling expenses Support department expenses: Purchasing Payroll accounting $781,000 296,800 187,400 A Region Operating Income B Region Operating Income B Region $639,000 242,800 153,400 $238,600 159,000 Allocate support department expenses proportional to the sales of each region. Determine the divisional operating income for the A and B regions.
2-Close or Retain a Store Superior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement of the 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 District $3,000,000 1,657,200 Sales $1,200,000 $1,080,000 Cost of goods sold 660,000 594,000 Gross margin Expenses Selling expenses 1,342,800 316,800 540,000 486,000 817,000 383,000 231,400 106,000 315,000 150,900 270,600 Administrative 126,100 Total expenses 1,200,000 337,400 465,900 396,700 Net income (loss) $142,800 $ (20,600) $74,100 $89,300 The store located in the North District has consistently shown losses over the past two years. For this reason, management is considering to closed 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…
Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 4,360,000 1,375,000 2,985,000 2,220,000 $ 765,000 Department Hardware $ 3,160,000 962,000 2,198,000 1,320,000 $ 878,000 Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Linens $ 1,200,000 413,000 787,000 900,000 $ (113,000) A study indicates that $371,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 13% decrease in the sales of the Hardware Department.
Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed: Activity Purchasing Warehousing Distributing Cost Driver Number of purchase orders Number of moves Number of shipments. Quantity of Cost Driver 1,040 8,400 540 Maximum cost Cost per Unit of Cost Driver $154 per order 34 per move 84 per shipment Caldwell buys 100,400 units at an average unit cost of $14 and sells them at an average unit price of $24. The firm also has fixed operating costs of $250,400 for the year. Caldwell's customers are demanding a 14% discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell's suppliers, however, are willing to give only a 8% discount. Required: Caldwell has estimated that it can reduce the number of purchase orders to 720 and can decrease the cost of each shipment by…
Using the data below for the Ace Guitar Company: A Region B Region Sales $521,500 $968,500 Cost of goods sold 198,200 368,000 Selling expenses 125,200 232,400 Service department expenses Purchasing $250,300 Payroll accounting 166,900 Allocate service department expenses proportional to the sales of each region. Determine the divisional income from operations for the A and B regions. For interim calculations, round percentages to one decimal place. A Region $ B Region $