*Allocated on the basis of sales dollars.
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 strong customer loyalty to Superior Markets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from closing the North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store?
1.Salary of new employee = $13,800
Delivery crew = $5,900
Sales Salaries = $65,400
Store manager Salaries = $30,500- 14,800 = $15,700
General Office Salaries = $7,400
Employee Salaries Avoided per Quarter = $108,200
2.Employment Taxes Avoided = 108,200*15% = $16,230
3.Financial Advantage = costs avoided –margin lost
= Direct Advertising cost + Store Rent +2/3rd Insurance +Utilities + Salaries Avoided + Taxes Avoided- 360,000
= 70,000 + 80,000 + 13,200*2/3 + 24,060 + 108,200 + 16,230 – 360,000
= -$52,710 i.e. disadvantage
4.North store should not be closed, as there is a loss in closing the store
5.Financial Advantage of closing the north store = Gross Margin from Increased sales of East Store – Disadvantage calculated above
= (882,000/1,960,000)*980,000*1/4 – 52,710
=$57,540
Since there is net advantage, the store should be closed.
*Allocated on the basis of sales dollars. The lease on the building housing the North Store...
All information needed to solve the problem is shown. What are the answers to questions 1, 2, 3, 4, and 5? 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 South East Total Store Store Store Sales $4,900,000 $980,000 $1,960,000 $1,960,000 Cost of goods 2,695,000 620,000 997,000 1,078,000 sold Gross...
Superior Markets, Inc. Income Statement For the Quarter Ended September 30 Total North Store South Store East Store Sales $ 4,800,000 $ 960,000 $ 1,920,000 $ 1,920,000 Cost of goods sold 2,640,000 600,000 984,000 1,056,000 Gross margin 2,160,000 360,000 936,000 864,000 Selling and administrative expenses: Selling expenses 853,000 249,400 324,000 279,600 Administrative expenses 473,000 124,000 177,900 171,100 Total expenses 1,326,000 373,400 501,900 450,700 Net operating income (loss) $ 834,000 $ (13,400 ) $ 434,100 $ 413,300 The North Store has...
Problem 11-26 Close or Retain a Store [LO11-2] 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 Total North Store South Store East Store Sales $ 4,100,000 $ 860,000 $ 1,640,000 $ 1,600,000 Cost of goods sold 2,255,000 515,000 860,000 880,000 Gross margin 1,845,000 345,000 780,000 720,000 Selling and administrative expenses:...
Problem 11-26 Close or Retain a Store [LO11-2] 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 Total North Store South Store East Store Sales $ 4,100,000 $ 860,000 $ 1,640,000 $ 1,600,000 Cost of goods sold 2,255,000 515,000 860,000 880,000 Gross margin 1,845,000 345,000 780,000 720,000 Selling and administrative expenses:...
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 South Total Store Store Sales $3,300,000 $760,000 $1,320,000 Cost of goods sold 1,815,000 433,000 711,000 Gross margin 1,485,000 327,000 609,000 Selling and administrative expenses: Selling expenses 823,000 234,400 316,500 Administrative expenses 398,000 109,000 155,400 Total expenses 1,221,000343,400 471,900 Net operating income...
Problem 11-26 Close or Retain a Store [LO11-2] 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 Total North Store South Store East Store Sales $ 4,000,000 $ 840,000 $ 1,600,000 $ 1,560,000 Cost of goods sold 2,200,000 495,000 847,000 858,000 Gross margin 1,800,000 345,000 753,000 702,000 Selling and administrative expenses:...
View Problem 6-26 (Algo) Close or Retain a Store (LO6-2] 6.68 points 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: eBook Print References Superior Markets, Inc. Income Statement For the Quarter Ended September 30 North South Total Store Store Sales $4,200,000 $840,000 $1,680,000 Cost of goods sold 2,310,000 500,000 886, 000 Gross margin 1,890,000 340,000 794,000 Selling and administrative expenses: Selling...
Problem 12-26 Close or Retain a Store [LO12-2] 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 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:...
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 Total North Store South Store East Store Sales $ 3,200,000 $ 740,000 $ 1,280,000 $ 1,180,000 Cost of goods sold 1,760,000 423,000 688,000 649,000 Gross margin 1,440,000 317,000 592,000 531,000 Selling and administrative expenses: Selling expenses 821,000 233,400 316,000 271,600 Administrative expenses...
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