Superior Markets, Inc., operates three stores in a largemetropolitan area. A segmented absorption costing income statementfor the company for the last quarter is given below:

Superior Markets, Inc. Income Statement For the Quarter Ended September 30
	Total	North Store	South Store	East Store
Sales	$	3,000,000		$	720,000		$	1,200,000		$	1,080,000
Cost of goods sold		1,657,200			403,200			660,000			594,000
Gross margin		1,342,800			316,800			540,000			486,000
Selling and administrative expenses:
Selling expenses		817,000			231,400			315,000			270,600
Administrative expenses		383,000			106,000			150,900			126,100
Total expenses		1,200,000			337,400			465,900			396,700
Net operating income (loss)	$	142,800		$	(20,600	)	$	74,100		$	89,300

The North Store has consistently shown losses over the past twoyears. For this reason, management is giving consideration toclosing the store. The company has asked you to make arecommendation as to whether the store should be closed or keptopen. The following additional information is available for youruse:

1. The breakdown of the selling and administrative expenses thatare shown above is as follows:

	Total	North Store	South Store	East Store
Selling expenses:
Sales salaries	$	239,000	$	70,000	$	89,000	$	80,000
Direct advertising		187,000		51,000		72,000		64,000
General advertising*		45,000		10,800		18,000		16,200
Store rent		300,000		85,000		120,000		95,000
Depreciation of store fixtures		16,000		4,600		6,000		5,400
Delivery salaries		21,000		7,000		7,000		7,000
Depreciation of delivery equipment		9,000		3,000		3,000		3,000
Total selling expenses	$	817,000	$	231,400	$	315,000	$	270,600

*Allocated on the basis of sales dollars.

	Total	North Store	South Store	East Store
Administrative expenses:
Store managers\' salaries	$	70,000	$	21,000	$	30,000	$	19,000
General office salaries*		50,000		12,000		20,000		18,000
Insurance on fixtures and inventory		25,000		7,500		9,000		8,500
Utilities		106,000		31,000		40,000		35,000
Employment taxes		57,000		16,500		21,900		18,600
General office—other*		75,000		18,000		30,000		27,000
Total administrative expenses	$	383,000	$	106,000	$	150,900	$	126,100

*Allocated on the basis of sales dollars.

1. The lease on the building housing the North Store can be brokenwith no penalty.

2. The fixtures being used in the North Store would be transferredto the other two stores if the North Store were closed.

3. The general manager of the North Store would be retained andtransferred to another position in the company if the North Storewere closed. She would be filling a position that would otherwisebe filled by hiring a new employee at a salary of $11,000 perquarter. The general manager of the North Store would continue toearn her normal salary of $12,000 per quarter. All other managersand employees in the North store would be discharged.

4. The company has one delivery crew that serves all three stores.One delivery person could be discharged if the North Store wereclosed. This person’s salary is $4,000 per quarter. The deliveryequipment would be distributed to the other stores. The equipmentdoes not wear out through use, but does eventually becomeobsolete.

5. The company pays employment taxes equal to 15% of theiremployees\' salaries.

6. One-third of the insurance in the North Store is on the store’sfixtures.

7. The “General office salaries” and “General office—other” relateto the overall management of Superior Markets, Inc. If the NorthStore were closed, one person in the general office could bedischarged because of the decrease in overall workload. Thisperson’s compensation is $6,000 per quarter.

Required:

1. How much employee salaries will the company avoid if itcloses the North Store?

2. How much employment taxes will the company avoid if it closesthe North Store?

3. What is the financial advantage (disadvantage) of closing theNorth Store?

4. Assuming that the North Store\'s floor space can’t besubleased, 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 thatif the North Store were closed, one-fourth of its sales wouldtransfer to the East Store, due to strong customer loyalty toSuperior Markets. Second, assume that the East Store has enoughcapacity to handle the increased sales that would arise fromclosing the North Store. Third, assume that the increased sales inthe East Store would yield the same gross margin as a percentage ofsales as present sales in the East store. Given these newassumptions, what is the financial advantage (disadvantage) ofclosing the North Store?