Related questions
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:
| Superior Markets, Incorporated Income Statement For the Quarter Ended September 30 |
||||
| Total | North Store | South Store | East Store | |
|---|---|---|---|---|
| Sales | $ 3,360,000 | $ 806,400 | $ 1,344,000 | $ 1,209,600 |
| Cost of goods sold | 1,856,064 | 451,584 | 739,200 | 665,280 |
| Gross margin | 1,503,936 | 354,816 | 604,800 | 544,320 |
| Selling and administrative expenses: | ||||
| Selling expenses | 915,040 | 259,168 | 352,800 | 303,072 |
| Administrative expenses | 428,960 | 118,720 | 169,008 | 141,232 |
| Total expenses | 1,344,000 | 377,888 | 521,808 | 444,304 |
| Net operating income (loss) | $ 159,936 | $ (23,072) | $ 82,992 | $ 100,016 |
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:
-
The breakdown of the selling and administrative expenses that are shown above is as follows:
| Total | North Store | South Store | East Store | |
|---|---|---|---|---|
| Selling expenses: | ||||
| Sales salaries | $ 267,680 | $ 78,400 | $ 99,680 | $ 89,600 |
| Direct advertising | 209,440 | 57,120 | 80,640 | 71,680 |
| General advertising* | 50,400 | 12,096 | 20,160 | 18,144 |
| Store rent | 336,000 | 95,200 | 134,400 | 106,400 |
| 17,920 | 5,152 | 6,720 | 6,048 | |
| Delivery salaries | 23,520 | 7,840 | 7,840 | 7,840 |
| Depreciation of delivery equipment | 10,080 | 3,360 | 3,360 | 3,360 |
| Total selling expenses | $ 915,040 | $ 259,168 | $ 352,800 | $ 303,072 |
*Allocated on the basis of sales dollars.
| Total | North Store | South Store | East Store | |
|---|---|---|---|---|
| Administrative expenses: | ||||
| Store managers' salaries | $ 78,400 | $ 23,520 | $ 33,600 | $ 21,280 |
| General office salaries* | 56,000 | 13,440 | 22,400 | 20,160 |
| Insurance on fixtures and inventory | 28,000 | 8,400 | 10,080 | 9,520 |
| Utilities | 118,720 | 34,720 | 44,800 | 39,200 |
| Employment taxes | 63,840 | 18,480 | 24,528 | 20,832 |
| General office—other* | 84,000 | 20,160 | 33,600 | 30,240 |
| Total administrative expenses | $ 428,960 | $ 118,720 | $ 169,008 | $ 141,232 |
*Allocated on the basis of sales dollars.
-
The lease on 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 if the North Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $12,320 per quarter. The general manager of the North Store would continue to earn her normal salary of $13,440 per quarter. All other managers and employees in the North store would be discharged.
-
The company has one delivery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person’s salary is $4,480 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but does eventually become obsolete.
-
The company pays employment taxes equal to 15% of their employees' salaries.
-
One-third of the insurance in the North Store is on the store’s fixtures.
-
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 the decrease in overall workload. This person’s compensation is $6,720 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 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?
Please show work.
Trending nowThis is a popular solution!
Step by stepSolved in 2 steps
Please also do parts 4 and 5 while showing work so that way I can understand better. Thank you.
Please also do parts 4 and 5 while showing work so that way I can understand better. Thank you.
- The general merchandise retail industry has a number of segments represented by the following companies: For a recent year, the following cost of goods sold and beginning and ending inventories are provided from corporate annual reports (in millions) for these three companies: a. Determine the inventory turnover ratio for all three companies. Round all calculations to one decimal place. b. Determine the number of days sales in inventory for all three companies. Use 365 days and round all calculations to one decimal place. c. Interpret these results based on each companys merchandising concept.arrow_forwardThe following revenue data were taken from the December 31, 2017, General Electric annual report (10-K): For each segment and each year, calculate intersegment sales (another name for transfer sales) as a percentage of total sales. Using Microsoft Excel or another spreadsheet application, create a clustered column graph to show the 2016 and 2017 percentages for each division. Comment on your observations of this data. How might a division sales manager use this data?arrow_forwardSalespersons report and analysis Walthman Industries Inc. employs seven salespersons to sell and distribute its product throughout the state. Data taken from reports received from the salespersons during the year ended December 31 are as follows: Instructions 1. Prepare a table indicating contribution margin, variable cost of goods sold as a percent of sales, variable selling expenses as a percent of sales, and contribution margin ratio by salesperson. (Round whole percent to one digit after decimal point.) 2. Which salesperson generated the highest contribution margin ratio for the year and why? 3. Briefly list factors other than contribution margin that should be considered in evaluating the performance of salespersons.arrow_forward
- 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: Superior Markets, IncorporatedIncome StatementFor the Quarter Ended September 30 Total North Store South Store East Store Sales $ 4,200,000 $ 1,008,000 $ 1,680,000 $ 1,512,000 Cost of goods sold 2,320,080 564,480 924,000 831,600 Gross margin 1,879,920 443,520 756,000 680,400 Selling and administrative expenses: Selling expenses 1,143,800 323,960 441,000 378,840 Administrative expenses 536,200 148,400 211,260 176,540 Total expenses 1,680,000 472,360 652,260 555,380 Net operating income (loss) $ 199,920 $ (28,840) $ 103,740 $ 125,020 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…arrow_forwardSuperior 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: Superior Markets, Incorporated Income Statement For the Quarter Ended September 30 Total Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total expenses Net operating income (loss) North Store South Store East Store $ 4,020,000 2,220,648 $ 964,800 $ 1,608,000 $ 1,447,200 540,288 884,400 795,960 1,799,352 424,512 723,600 651,240 1,094,780 513,220 1,608,000 310,076 422,100 362,604 142,040 202,206 168,974 452,116 624,306 531,578 $ 191,352 $ (27,604) $ 99,294 $ 119,662 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…arrow_forwardSuperior 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: Superior Markets, Incorporated Income Statement For the Quarter Ended September 30 Total North Store South Store East Store Sales $ 3,960,000 $ 950,400 $ 1,584,000 $ 1,425,600 Cost of goods sold 2,187,504 532,224 871,200 784,080 Gross margin 1,772,496 418,176 712,800 641,520 Selling and administrative expenses: Selling expenses 1,078,440 305,448 415,800 357,192 Administrative expenses 505,560 139,920 199,188 166,452 Total expenses 1,584,000 445,368 614,988 523,644 Net operating income (loss) $ 188,496 $ (27,192) $ 97,812 $ 117,876 The North Store has consistently shown losses over the past two years, so management is considering closing this store. A detailed breakdown of the selling and administrative expenses shown above is as follows: Total North Store South Store East Store Selling…arrow_forward
- 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 StatementFor the Quarter Ended September 30 Total NorthStore SouthStore EastStore Sales $ 4,600,000 $ 920,000 $ 1,840,000 $ 1,840,000 Cost of goods sold 2,530,000 565,000 953,000 1,012,000 Gross margin 2,070,000 355,000 887,000 828,000 Selling and administrative expenses: Selling expenses 849,000 247,400 323,000 278,600 Administrative expenses 463,000 122,000 174,900 166,100 Total expenses 1,312,000 369,400 497,900 444,700 Net operating income (loss) $ 758,000 $ (14,400 ) $ 389,100 $ 383,300 The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store.…arrow_forwardSuperior 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 Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total expenses Net operating income (loss) Selling expenses: Sales salaries Direct advertising General advertising* Store rent Depreciation of store fixtures Delivery salaries Depreciation of delivery equipment Total selling expenses *Allocated on the basis of sales dollars. Administrative expenses: Store managers' salaries General office salaries* Superior Markets, Incorporated Income Statement For the Quarter Ended September 30 Insurance on fixtures and inventory Utilities Employment taxes General office-other* Total $ 3,000,000 1,657, 200 1,342,800 Total administrative expenses *Allocated on the basis of sales dollars. 817,000 383,000 1,200,000 $ 142,800 a. The breakdown of the selling…arrow_forwardUsing the data below for the Ace Guitar Company: A Region B Region Sales $638,000 $522,000 Cost of goods sold 242,400 198,400 Selling expenses 153,100 125,300 Service department expenses Purchasing $194,900 Payroll accounting 129,900 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) A Region b) B Regionarrow_forward
- Using the data below for the Ace Guitar Company: A Region B Region Sales $638,000 $522,000 Cost of goods sold 242,400 198,400 Selling expenses 153,100 125,300 Support department expenses: Purchasing $194,900 Payroll accounting 129,900 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.arrow_forwardUsing the data below for the Ace Guitar Company: A Region B Region Sales $877,500 $472,500 Cost of goods sold 333,500 179,500 Selling expenses 210,600 113,400 Support department expenses: Purchasing $226,800 Payroll accounting 151,200 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. A Region Operating Income B Region Operating Income %24arrow_forwardThe following Income statement was drawn from the records of Fanning Company, a merchandising firm: Sales revenue (7,000 units x $160) Cost of goods sold (7,000 units * $87) Gross margin Sales commissions (5% of sales) Administrative salaries expense Required For the Year Ended December 31, Year 1 Advertising expense Depreciation expense Shipping and handling expenses (7,000 units * $1) Net income FANNING COMPANY Income Statement Req A a. Reconstruct the Income statement using the contribution margin format. b. Calculate the magnitude of operating leverage. c. Use the measure of operating leverage to determine the amount of net Income Fanning will earn If sales Increase by 20 percent. Complete this question by entering your answers in the tabs below. Reg B and C FANNING COMPANY Income Statement For the Year Ended December 31, Year 1 Less: Variable costs Reconstruct the income statement using the contribution margin format. Less: Fixed costs $1,120,088 (609,000) 511,000 (56,000)…arrow_forward
- Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub 
Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning