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
1. A study showed that in a certain month, the mean time spent per visit to Facebook was 19.5 minutes. Assumes the standard deviation of the population is 8 minutes. Suppose that a simple random sample of 100 visits in that month has a sample mean of 21.52 minutes. A social scientist is interested in knowing whether the mean time of Facebook visits has increased. Perform the hypothesis test and compute the P-value.
Based on the P value, what is the conclusion we test at 0.05 level significance?
2. A random sample of 64 second graders in a certain school district are given a standardized mathematics skills test. The sample mean score is 51.58. Assume the standard deviation for the population of test scores is 15. The nationwide average score on this test us 50. The school superintendent wants to know whether the second graders in her school district have greater math skills than the nationwide average. Perform the hypothesis test and compute the P value.
Based on your P value, what is the conclusion if we test at 0.05 level of significance?
3. Suppose that the mean price of a home in Denver, Colorado in 2008 was 225.3 thousand dollars. A random sample of 49 homes sold in 2010 had a mean price of 200.1 thousand dollars. A real estate firm wants to test to see if the mean price of 2010 differs from the mean price in 2008. Assume that the population standard deviation is 140. Perform the hypothesis test and compute the P value.
Based on your P value, what is the conclusion if we test at the 0.05 level of significance?
In: Statistics and Probability
25)
Which of the following describes “factoring”?
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Paying invoices promptly in order to take advantage of a cash discount |
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Selling accounts receivable |
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Pledging accounts receivable as collateral |
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Paying off bonds prior to their maturity date. |
27)
2/15 net 45 (or 2/15, n/45) translates as:
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15 percent cash discount if paid in 2 days, net 45-day credit period. |
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45 percent of account due in 15 days, payment prior to day 15 receives a 2 percent discount. |
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2 percent cash discount if paid prior to 15 days, if customer does not take a cash discount, the full balance is due in 45 days. |
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2 percent of the balance is due in 15 days; the remaining balance is due in 45 days. |
28)
Zoro Inc. purchased a new machine on October 20, 2010 for $1,000,000 on credit. The supplier has offered Zoro terms of 2/10, n/45. Zoro’s bank is currently lending funds at 8 percent. IF Zoro pays this invoice within the DISCOUNT period, what is the exact amount they will pay the supplier?
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$20,000 |
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$920,000 |
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$980,000 |
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$1,000,000 |
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$1,020,000 |
29)
Zoro Inc. purchased a new machine on October 20, 2010 for $1,000,000 on credit. The supplier has offered Zoro terms of 2/10, n/45. Zoro’s bank is currently lending funds at 8 percent. IF Zoro elects NOT to pay this invoice within the DISCOUNT period, what is the exact amount they should pay the supplier?
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$20,000 |
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$920,000 |
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$980,000 |
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$1,000,000 |
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$1,020,000 |
In: Finance
Norther Leasing Corp. has the following standards for one unit of product:
|
Direct material: 80 pounds X $6 |
$480 |
|
Direct labor: 3 hours X $16 per hour |
48 |
|
Variable overhead: 1.5 hours of machine time X $50 per hour |
75 |
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Fixed overhead: 1.5 hours of machine time X $30 per hour |
45 |
The predetermined OH rates were developed using a practical capacity of 6,000 units per year. Production is assumed to occur evenly throughout the year.
During May 2010, the company produced 525 units. Actual data for May 2010 are as follows:
Direct material purchased: 45,000 pounds X $5.92 per pound
Direct material used: 43,020 pounds (all from May’s purchases)
Total labor cost: $24,955 for 1,550 hour
Variable overhead incurred: $43,750 for 800 hours of machine time
Fixed overhead incurred: $22,800 for 800 hours of machine time
Required: Calculate the following:
a) Material cost variance
b) Material price variance based on purchases
c) Material quantity variance
d) Labor cost variance
e) Labor rate variance
f) Labor efficiency variance
g) Variable overhead Cost
h) Variable overhead expenditure variance
i) Variable efficiency variances
j) Fixed overhead cost
k) Fixed overhead expenditure
l) Fixed volume variances
In: Accounting
The following situations involve the application of the time value of money concept. Use the full factor when calculating your results.
Use the appropriate present or future value table:
FV of $1, PV of $1, FV of Annuity of $1 and PV of Annuity of $1
1. Janelle Carter deposited $9,750 in the bank
on January 1, 2000, at an interest rate of 10% compounded annually.
How much has accumulated in the account by January 1, 2017? Round
to the nearest whole dollar.
$fill in the blank 1
2. Mike Smith deposited $20,140 in the bank on
January 1, 2007. On January 2, 2017, this deposit has accumulated
to $32,806. Interest is compounded annually on the account. What
rate of interest did Mike earn on the deposit? Round to the nearest
whole percent.
fill in the blank 2 %
3. Lee Spony made a deposit in the bank on
January 1, 2010. The bank pays interest at the rate of 9%
compounded annually. On January 1, 2017, the deposit has
accumulated to $16,230. How much money did Lee originally deposit
on January1, 2010? Round to the nearest whole dollar.
$fill in the blank 3
4. Nancy Holmes deposited $5,380 in the bank on
January 1 a few years ago. The bank pays an interest rate of 8%
compounded annually, and the deposit is now worth $11,615. How many
years has the deposit been invested? Round to the nearest whole
year.
fill in the blank 4 years
In: Accounting