Bob’s Beans, a coffee shop and breakfast catering chain

EXCEL Format Required
Bob’s Beans, a coffee shop and breakfast catering chain, operates three cafes in South Florida. Segment reporting for the last quarter as follows: 
Bob’s Beans, Inc.
Income Statement
For the Quarter
                                                                Total                      Location 1            Location 2            Location 3
Sales                                                      3,000,000             720,000                 1,200,000             1,080,000
COGS                                                      1,657,200             403,200                 660,000                 594,000               
Gross margin                                          1,342,800             316,800                 540,000                 486,000
SG&A Expenses:            
Selling expenses                                      817,000                 231,400                 315,000                 270,600
Admin expenses                                      383,000                 106,000                 150,900                 126,100               
Total expenses                                         1,200,000             337,400                 465,900                 396,700
Net operating income (loss)        142,800                 (20,600)                74,100                   89,300
Location 1 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 is as follows (Advertising costs, general office salaries and general office other are incurred at the total company level and allocated based on sales dollars):
                                                             Total                      Location 1            Location 2            Location 3
Selling expenses:           
Sales salaries                                    239,000                 70,000                   89,000                   80,000
Direct advertising                                               187,000                 51,000                   72,000                   64,000
General advertising                                             45,000                   10,800                   18,000                   16,200
Store rent                                                          300,000                 85,000                   120,000                 95,000
Depreciation of store fixtures                               16,000                   4,600                     6,000                     5,400
Delivery salaries                                                   21,000                   7,000                     7,000                     7,000
Depreciation of delivery equipment                       9,000                     3,000                     3,000                     3,000                   
Total selling expenses                                        817,000                 231,400                 315,000                 270,600
                                                                                Total                      Location 1            Location 2            Location 3
Administrative expenses:          
Store management salaries                                      70,000                   21,000                   30,000                   19,000
General office salaries                                               50,000                   12,000                   20,000                   18,000
Insurance on fixtures and inventory                         25,000                   7,500                     9,000                     8,500
Utilities                                                                     106,000                 31,000                   40,000                   35,000
Employment taxes                                                   57,000                   16,500                   21,900                   18,600
General office—other                                                75,000                   18,000                   30,000                   27,000
Total administrative expenses                                 383,000                 106,000                 150,900                 126,100
b. The lease on the building housing the Location 1 can be broken with no penalty.        
c. The fixtures being used in the Location 1 would be transferred to the other two stores if the Location 1 were closed.
d. The general manager of the Location 1 would be retained and transferred to another position in the company if the Location 1 were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $11,000 per quarter. The general manager of the Location 1 would be retained at her normal salary of $12,000 per quarter. All other employees in the store would be discharged.        
e. The company has one delivery crew that serves all three stores. One delivery person could be discharged if the Location 1 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.   
f. The company’s employment taxes are 15% of salaries.            
g. One-third of the insurance in the Location 1 is on the store’s fixtures.
h. The “General office salaries” and “General office—other” relate to the overall management of the company.  If the Location 1 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.      
Required:          
1. Prepare a schedule showing the change in revenues and expenses and the impact on the company’s overall net operating income that would result if the Location 1 were closed.   
2. Assuming that the store space can’t be subleased, what recommendation would you make to the management of Bob’s Beans?   
3. Disregard requirement 2. Assume that if the Location 1 were closed, at least one-fourth of its sales would transfer to the Location 3, due to strong customer loyalty to Bob’s Beans. Location 3 has enough capacity to handle the increased sales. You may assume that the increased sales in Location 3 would yield the same gross margin as a percentage of sales as present sales in that store. What effect would these factors have on your recommendation concerning the Location 1?
Show all computations to support your answer.