Thrifty Markets, Inc., operates three stores in a large metropolitan area.

Thrifty Markets, Inc., operates three stores in a large metropolitan area.The
company’s segmented absorption costing income statements for the last
quarter is given below:DISCUSSION 6 GIVEN INFORMATION.pdfManagement
is very concerned about the Downtown Store’s inability to show a profit
and consideration is being given to closing the store. The company has
asked you to make a recommendation as to what course of action should be
taken. The following additional information is available about the
manger of the store has been with the company for many years; he would
be retained and transferred to another position in the company if the
store were closed. His salary is $6,000 per month, or $18,000 per
quarter. If the store were not closed, a new employee would be hired to
fill the other position at a salary of $5,000 per month.The lease on the building housing the Downtown Store can be broken with no penalty.The fixtures being used in the Downtown Store would be transferred to the other two stores if the Downtown Store were closed.The compnay’s employment taxes are 12% of salariesA
single crew serves all three stores. One delivery person could be
discharged if the Downtown Store were closed; this person’s salary
amounts to $7,000 per quarter. The delivery equipment would be
distributed to other stores. The equipment does not wear out through us,
but it dies eventually become obsolete.One-third of the Downtown Store’s insurance relates to its fixtures.The
general office salaries and other expenses relate to the general
management of Thrifty Markets, Inc. The employee in the general office
who is responsible for the Downtown Store would be discharged if the
store were closed. This employee’s compensation amounts to $8,000 per
a schedule showing the change in revenues and expenses and the impact
on the overall company net operating income that would result if the
Downtown Store were closed.Based on your computations in (1) above, what recommendation would you make to the management of Thrifty markets, inc.?Assume
that if the Downtown Store were closed, sales in the uptown Store would
increase by $200,000 per quarter due to loyal customers shifting their
buying to the Uptown Store. The uptown Store has ample capacity to
handle the increased sales, and its gross margin is 43% of sales. What
effect would these factors have on your recommendation concerning the

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