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 | $ | 3,900,000 | $ | 820,000 | $ | 1,560,000 | $ | 1,520,000 | ||||
| Cost of goods sold | 2,145,000 | 480,000 | 829,000 | 836,000 | ||||||||
| Gross margin | 1,755,000 | 340,000 | 731,000 | 684,000 | ||||||||
| Selling and administrative expenses: | ||||||||||||
| Selling expenses | 835,000 | 240,400 | 319,500 | 275,100 | ||||||||
| Administrative expenses | 428,000 | 115,000 | 164,400 | 148,600 | ||||||||
| Total expenses | 1,263,000 | 355,400 | 483,900 | 423,700 | ||||||||
| Net operating income (loss) | $ | 492,000 | $ | (15,400 | ) | $ | 247,100 | $ | 260,300 | |||
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 | $ | 241,600 | $ | 56,800 | $ | 85,400 | $ | 99,400 |
| Direct advertising | 174,000 | 60,000 | 81,000 | 33,000 | ||||
| General advertising* | 58,500 | 12,300 | 23,400 | 22,800 | ||||
| Store rent | 305,000 | 94,000 | 111,000 | 100,000 | ||||
| Depreciation of store fixtures | 20,500 | 5,500 | 6,900 | 8,100 | ||||
| Delivery salaries | 23,700 | 7,900 | 7,900 | 7,900 | ||||
| Depreciation of delivery equipment |
11,700 | 3,900 | 3,900 | 3,900 | ||||
| Total selling expenses | $ | 835,000 | $ | 240,400 | $ | 319,500 | $ | 275,100 |
*Allocated on the basis of sales dollars.
| Total |
North Store |
South Store |
East Store |
|||||
| Administrative expenses: | ||||||||
| Store managers' salaries | $ | 83,500 | $ | 25,500 | $ | 34,500 | $ | 23,500 |
| General office salaries* | 58,500 | 12,400 | 23,400 | 22,700 | ||||
| Insurance on fixtures and inventory | 34,000 | 10,200 | 13,500 | 10,300 | ||||
| Utilities | 93,405 | 31,010 | 31,320 | 31,075 | ||||
| Employment taxes | 61,095 | 15,390 | 22,680 | 23,025 | ||||
| General office—other* | 97,500 | 20,500 | 39,000 | 38,000 | ||||
| Total administrative expenses | $ | 428,000 | $ | 115,000 | $ | 164,400 | $ | 148,600 |
*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 $11,400 per quarter. The general manager of the North Store would continue to earn her normal salary of $12,400 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 $4,900 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, Inc. 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 $6,200 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?
In: Accounting
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 | $ | 4,600,000 | $ | 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. 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:
a. 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 | $ | 230,400 | $ | 62,200 | $ | 68,600 | $ | 99,600 |
| Direct advertising | 181,000 | 67,000 | 88,000 | 26,000 | ||||
| General advertising* | 69,000 | 13,800 | 27,600 | 27,600 | ||||
| Store rent | 305,000 | 85,000 | 118,000 | 102,000 | ||||
| Depreciation of store fixtures | 24,000 | 6,200 | 7,600 | 10,200 | ||||
| Delivery salaries | 25,800 | 8,600 | 8,600 | 8,600 | ||||
| Depreciation of delivery equipment |
13,800 | 4,600 | 4,600 | 4,600 | ||||
| Total selling expenses | $ | 849,000 | $ | 247,400 | $ | 323,000 | $ | 278,600 |
*Allocated on the basis of sales dollars.
| Total | North Store |
South Store |
East Store |
|||||
| Administrative expenses: | ||||||||
| Store managers' salaries | $ | 94,000 | $ | 29,000 | $ | 38,000 | $ | 27,000 |
| General office salaries* | 69,000 | 13,800 | 27,600 | 27,600 | ||||
| Insurance on fixtures and inventory | 41,000 | 12,300 | 17,000 | 11,700 | ||||
| Utilities | 81,120 | 26,860 | 24,880 | 29,380 | ||||
| Employment taxes | 62,880 | 17,040 | 21,420 | 24,420 | ||||
| General office—other* | 115,000 | 23,000 | 46,000 | 46,000 | ||||
| Total administrative expenses | $ | 463,000 | $ | 122,000 | $ | 174,900 | $ | 166,100 |
*Allocated on the basis of sales dollars.
b. 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 were closed.
d. 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 $12,800 per quarter. The general manager of the North Store would continue to earn her normal salary of $13,800 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 the North Store were closed. This person’s salary is $5,600 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.
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, Inc. 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 $6,900 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?
In: Accounting
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 | $ | 3,500,000 | $ | 780,000 | $ | 1,400,000 | $ | 1,320,000 | ||||
| Cost of goods sold | 1,925,000 | 450,000 | 749,000 | 726,000 | ||||||||
| Gross margin | 1,575,000 | 330,000 | 651,000 | 594,000 | ||||||||
| Selling and administrative expenses: | ||||||||||||
| Selling expenses | 827,000 | 236,400 | 317,500 | 273,100 | ||||||||
| Administrative expenses | 408,000 | 111,000 | 158,400 | 138,600 | ||||||||
| Total expenses | 1,235,000 | 347,400 | 475,900 | 411,700 | ||||||||
| Net operating income (loss) | $ | 340,000 | $ | (17,400 | ) | $ | 175,100 | $ | 182,300 | |||
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 | $ | 228,000 | $ | 62,600 | $ | 77,000 | $ | 88,400 |
| Direct advertising | 170,000 | 56,000 | 77,000 | 37,000 | ||||
| General advertising* | 52,500 | 11,700 | 21,000 | 19,800 | ||||
| Store rent | 325,000 | 90,000 | 125,000 | 110,000 | ||||
| Depreciation of store fixtures | 18,500 | 5,100 | 6,500 | 6,900 | ||||
| Delivery salaries | 22,500 | 7,500 | 7,500 | 7,500 | ||||
| Depreciation of delivery equipment |
10,500 | 3,500 | 3,500 | 3,500 | ||||
| Total selling expenses | $ | 827,000 | $ | 236,400 | $ | 317,500 | $ | 273,100 |
*Allocated on the basis of sales dollars.
| Total | North Store |
South Store |
East Store |
|||||
| Administrative expenses: | ||||||||
| Store managers' salaries | $ | 77,500 | $ | 23,500 | $ | 32,500 | $ | 21,500 |
| General office salaries* | 52,500 | 11,800 | 21,000 | 19,700 | ||||
| Insurance on fixtures and inventory | 30,000 | 9,000 | 11,500 | 9,500 | ||||
| Utilities | 103,425 | 31,390 | 37,700 | 34,335 | ||||
| Employment taxes | 57,075 | 15,810 | 20,700 | 20,565 | ||||
| General office—other* | 87,500 | 19,500 | 35,000 | 33,000 | ||||
| Total administrative expenses | $ | 408,000 | $ | 111,000 | $ | 158,400 | $ | 138,600 |
*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 $10,800 per quarter. The general manager of the North Store would continue to earn her normal salary of $11,800 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 $4,500 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, Inc. 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 $5,900 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?
In: Accounting
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 | $ | 4,300,000 | $ | 860,000 | $ | 1,720,000 | $ | 1,720,000 | ||||
| Cost of goods sold | 2,365,000 | 510,000 | 909,000 | 946,000 | ||||||||
| Gross margin | 1,935,000 | 350,000 | 811,000 | 774,000 | ||||||||
| Selling and administrative expenses: | ||||||||||||
| Selling expenses | 843,000 | 244,400 | 321,500 | 277,100 | ||||||||
| Administrative expenses | 448,000 | 119,000 | 170,400 | 158,600 | ||||||||
| Total expenses | 1,291,000 | 363,400 | 491,900 | 435,700 | ||||||||
| Net operating income (loss) | $ | 644,000 | $ | (13,400 | ) | $ | 319,100 | $ | 338,300 | |||
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 | $ | 250,200 | $ | 67,000 | $ | 75,800 | $ | 107,400 |
| Direct advertising | 178,000 | 64,000 | 85,000 | 29,000 | ||||
| General advertising* | 64,500 | 12,900 | 25,800 | 25,800 | ||||
| Store rent | 290,000 | 82,000 | 115,000 | 93,000 | ||||
| Depreciation of store fixtures | 22,500 | 5,900 | 7,300 | 9,300 | ||||
| Delivery salaries | 24,900 | 8,300 | 8,300 | 8,300 | ||||
| Depreciation of delivery equipment |
12,900 | 4,300 | 4,300 | 4,300 | ||||
| Total selling expenses | $ | 843,000 | $ | 244,400 | $ | 321,500 | $ | 277,100 |
*Allocated on the basis of sales dollars.
| Total | North Store |
South Store |
East Store |
|||||
| Administrative expenses: | ||||||||
| Store managers' salaries | $ | 89,500 | $ | 27,500 | $ | 36,500 | $ | 25,500 |
| General office salaries* | 64,500 | 13,000 | 25,800 | 25,700 | ||||
| Insurance on fixtures and inventory | 38,000 | 11,400 | 15,500 | 11,100 | ||||
| Utilities | 84,135 | 28,230 | 27,640 | 28,265 | ||||
| Employment taxes | 64,365 | 17,370 | 21,960 | 25,035 | ||||
| General office—other* | 107,500 | 21,500 | 43,000 | 43,000 | ||||
| Total administrative expenses | $ | 448,000 | $ | 119,000 | $ | 170,400 | $ | 158,600 |
*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 $12,000 per quarter. The general manager of the North Store would continue to earn her normal salary of $13,000 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 $5,300 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, Inc. 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 $6,500 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?
In: Accounting
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 | $ | 3,900,000 | $ | 820,000 | $ | 1,560,000 | $ | 1,520,000 | ||||
| Cost of goods sold | 2,145,000 | 480,000 | 829,000 | 836,000 | ||||||||
| Gross margin | 1,755,000 | 340,000 | 731,000 | 684,000 | ||||||||
| Selling and administrative expenses: | ||||||||||||
| Selling expenses | 835,000 | 240,400 | 319,500 | 275,100 | ||||||||
| Administrative expenses | 428,000 | 115,000 | 164,400 | 148,600 | ||||||||
| Total expenses | 1,263,000 | 355,400 | 483,900 | 423,700 | ||||||||
| Net operating income (loss) | $ | 492,000 | $ | (15,400 | ) | $ | 247,100 | $ | 260,300 | |||
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 | $ | 241,600 | $ | 56,800 | $ | 85,400 | $ | 99,400 |
| Direct advertising | 174,000 | 60,000 | 81,000 | 33,000 | ||||
| General advertising* | 58,500 | 12,300 | 23,400 | 22,800 | ||||
| Store rent | 305,000 | 94,000 | 111,000 | 100,000 | ||||
| Depreciation of store fixtures | 20,500 | 5,500 | 6,900 | 8,100 | ||||
| Delivery salaries | 23,700 | 7,900 | 7,900 | 7,900 | ||||
| Depreciation of delivery equipment |
11,700 | 3,900 | 3,900 | 3,900 | ||||
| Total selling expenses | $ | 835,000 | $ | 240,400 | $ | 319,500 | $ | 275,100 |
*Allocated on the basis of sales dollars.
| Total | North Store |
South Store |
East Store |
|||||
| Administrative expenses: | ||||||||
| Store managers' salaries | $ | 83,500 | $ | 25,500 | $ | 34,500 | $ | 23,500 |
| General office salaries* | 58,500 | 12,400 | 23,400 | 22,700 | ||||
| Insurance on fixtures and inventory | 34,000 | 10,200 | 13,500 | 10,300 | ||||
| Utilities | 93,405 | 31,010 | 31,320 | 31,075 | ||||
| Employment taxes | 61,095 | 15,390 | 22,680 | 23,025 | ||||
| General office—other* | 97,500 | 20,500 | 39,000 | 38,000 | ||||
| Total administrative expenses | $ | 428,000 | $ | 115,000 | $ | 164,400 | $ | 148,600 |
*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 $11,400 per quarter. The general manager of the North Store would continue to earn her normal salary of $12,400 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 $4,900 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, Inc. 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 $6,200 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?
In: Accounting
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 | $ | 4,700,000 | $ | 940,000 | $ | 1,880,000 | $ | 1,880,000 | ||||
| Cost of goods sold | 2,585,000 | 580,000 | 971,000 | 1,034,000 | ||||||||
| Gross margin | 2,115,000 | 360,000 | 909,000 | 846,000 | ||||||||
| Selling and administrative expenses: | ||||||||||||
| Selling expenses | 851,000 | 248,400 | 323,500 | 279,100 | ||||||||
| Administrative expenses | 468,000 | 123,000 | 176,400 | 168,600 | ||||||||
| Total expenses | 1,319,000 | 371,400 | 499,900 | 447,700 | ||||||||
| Net operating income (loss) | $ | 796,000 | $ | (11,400 | ) | $ | 409,100 | $ | 398,300 | |||
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 | $ | 252,800 | $ | 60,600 | $ | 80,200 | $ | 112,000 |
| Direct advertising | 182,000 | 68,000 | 89,000 | 25,000 | ||||
| General advertising* | 70,500 | 14,100 | 28,200 | 28,200 | ||||
| Store rent | 281,000 | 86,000 | 105,000 | 90,000 | ||||
| Depreciation of store fixtures | 24,500 | 6,300 | 7,700 | 10,500 | ||||
| Delivery salaries | 26,100 | 8,700 | 8,700 | 8,700 | ||||
| Depreciation of delivery equipment |
14,100 | 4,700 | 4,700 | 4,700 | ||||
| Total selling expenses | $ | 851,000 | $ | 248,400 | $ | 323,500 | $ | 279,100 |
*Allocated on the basis of sales dollars.
| Total | North Store |
South Store |
East Store |
|||||
| Administrative expenses: | ||||||||
| Store managers' salaries | $ | 95,500 | $ | 29,500 | $ | 38,500 | $ | 27,500 |
| General office salaries* | 70,500 | 14,200 | 28,200 | 28,100 | ||||
| Insurance on fixtures and inventory | 42,000 | 12,600 | 17,500 | 11,900 | ||||
| Utilities | 75,765 | 26,250 | 21,860 | 27,655 | ||||
| Employment taxes | 66,735 | 16,950 | 23,340 | 26,445 | ||||
| General office—other* | 117,500 | 23,500 | 47,000 | 47,000 | ||||
| Total administrative expenses | $ | 468,000 | $ | 123,000 | $ | 176,400 | $ | 168,600 |
*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 $13,200 per quarter. The general manager of the North Store would continue to earn her normal salary of $14,200 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 $5,700 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, Inc. 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 $7,100 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?
In: Accounting
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 | $ | 3,100,000 | $ | 700,000 | $ | 1,240,000 | $ | 1,160,000 | ||||
| Cost of goods sold | 1,705,000 | 380,000 | 687,000 | 638,000 | ||||||||
| Gross margin | 1,395,000 | 320,000 | 553,000 | 522,000 | ||||||||
| Selling and administrative expenses: | ||||||||||||
| Selling expenses | 819,000 | 232,400 | 315,500 | 271,100 | ||||||||
| Administrative expenses | 388,000 | 107,000 | 152,400 | 128,600 | ||||||||
| Total expenses | 1,207,000 | 339,400 | 467,900 | 399,700 | ||||||||
| Net operating income (loss) | $ | 188,000 | $ | (19,400 | ) | $ | 85,100 | $ | 122,300 | |||
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 | $ | 240,400 | $ | 69,000 | $ | 86,600 | $ | 84,800 |
| Direct advertising | 180,000 | 52,000 | 73,000 | 55,000 | ||||
| General advertising* | 46,500 | 10,500 | 18,600 | 17,400 | ||||
| Store rent | 305,000 | 86,000 | 121,000 | 98,000 | ||||
| Depreciation of store fixtures | 16,500 | 4,700 | 6,100 | 5,700 | ||||
| Delivery salaries | 21,300 | 7,100 | 7,100 | 7,100 | ||||
| Depreciation of delivery equipment |
9,300 | 3,100 | 3,100 | 3,100 | ||||
| Total selling expenses | $ | 819,000 | $ | 232,400 | $ | 315,500 | $ | 271,100 |
*Allocated on the basis of sales dollars.
| Total | North Store |
South Store |
East Store |
|||||
| Administrative expenses: | ||||||||
| Store managers' salaries | $ | 71,500 | $ | 21,500 | $ | 30,500 | $ | 19,500 |
| General office salaries* | 46,500 | 11,000 | 18,600 | 16,900 | ||||
| Insurance on fixtures and inventory | 26,000 | 7,800 | 9,500 | 8,700 | ||||
| Utilities | 109,545 | 32,910 | 41,380 | 35,255 | ||||
| Employment taxes | 56,955 | 16,290 | 21,420 | 19,245 | ||||
| General office—other* | 77,500 | 17,500 | 31,000 | 29,000 | ||||
| Total administrative expenses | $ | 388,000 | $ | 107,000 | $ | 152,400 | $ | 128,600 |
*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 $10,000 per quarter. The general manager of the North Store would continue to earn her normal salary of $11,000 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 $4,100 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, Inc. 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 $5,500 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?
In: Accounting
Jupiter Company's budget for coming year estimates monthly sales
in units for first five months of the year as follows: April
35,000; May, 38,000; June 40,000; July, 39,000; and August
38,000.
The ending inventory of finished units for each month is to be
maintained at 25% of next month's estimated sales. On April 1,
there were 12,000 units on hand.
a. prepare a production budget (in units) for the first four months
of the period. Rounds amounts to the nearest unit.
Jupiter company continued from (a) above. Each unit of finished
product requires the use of four pound of materials. Materials are
to be carried in inventory in an amount equal to 20% of expected
production of the coming month. Beginning inventory on April 1 of
the current year was 32,500 units of material. Each unit of
material costs $2.
b. prepare a material purchases budget ( in units of materials and
dollars) for the second quarter of the coming year. round amounts
to the nearest unit.
(please explain how did you get the answer)!
In: Accounting
4. A large corporation subjected to 21% marginal tax is investing 200,000 in a new income producing asset that is depreciated on a MACRS 5 year schedule. The asset was paid for completely when purchased in the first quarter of the first year of operation but for analysis purposes the cash flow of purchase is in period 0. The expected revenue and costs by year are given below. When retired, the asset will have no value.
|
Year |
1 |
2 |
3 |
4 |
5 |
6 |
|
Direct Revenue |
90,000 |
190,000 |
210,000 |
180,000 |
130,000 |
80,000 |
|
Direct and Allocated Cost |
35,000 |
85,000 |
90,000 |
85,000 |
65,000 |
35,000 |
Prepare a net cash flow statement / exhibit for all 6 years of the new asset.
a. What is the net cash flow in year 1?
b. What is the net cash flow in year 6?
c. What is the PW of the net cash flow applying an interest rate of 12.0%? Place the purchase at year 0 with all other cash flows at the end of the respective year.
In: Finance
A firm and its supplier are going to negotiate a deal. Since the supplier’s cost is $10 million per quarter and the value to the firm is $14 million per quarter, there is $4 million per quarter to split between the two. However, they can each hire a negotiation consultant for $500,000 per negotiation. If neither hires the consultant, each expects to get half of the $4 million pot. If only one hires the consultant, it expects to get three-fourths of the pot minus the consultant costs. If they both hire consultants, they cancel each other out and they expect to get half the pot minus the consulting costs. What is the equilibrium of this simultaneous move game?
In: Economics