b. The lease on the building housing the North Store can be broken with no penalty.

– Avoidable. Relevant. If North Store is closed, rent we can avoid paying rent.

c. The fixtures being used in the North Store would be transferred to the other two stores if the North Store were closed.

– Unavoidable. Irrelevant. Even if North Store is closed or not, Superior Markets, Inc will still incur depreciation expense on this asset.

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  11,000. The general manager of the North Store
would continue to earn her normal salary of 12,000. All other managers and employees in the North store would be discharged.

– Salary of General Manager

Avoidable: 21,000 Salary before closure

Unavoidable: 12,000 Salary after closure

Net Avoidable: 9,000 Reduction in salary after closing

- All other managers and employees

Avoidable: We no longer need to pay the ff since they will be discharged after closing:

Sales salaries 70,000

Delivery Salaries 4,000 (From 7,000, 4,000 is only avoidable)

Store manager’s salaries 9,000

Salary of new manager 11,000 (a position that would otherwise be filled by hiring a new employee)

General Office salaries 6,000

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 4,000 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. – Unavoidable. Irrelevant.
f. The company pays employment taxes equal to 15%

Only the salaries avoided is subject to taxes.

100,000 * 15% = 15,000 avoidable tax expense

g. One-third of the insurance in the North Store is on the store’s fixtures.

1/3 is irrelevant because these fixtures will be retained even North is closed.

2/3 is relevant since insurance expense on inventories will be eliminated if North is closed.

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 6,000 per quarter. – Avoidable. Relevant