The managers of Lessing Toy & Hobby (LTH) have decided to keep the stores in the...

  

Transcribed Image Text:

The managers of Lessing Toy & Hobby (LTH) have decided to keep the stores in the Northern Division open, in spite of the dwindling demand in the area. They want to forecast what the income will be in the coming year, using the income statement as the base. The cost analyst at LTH estimates sales in the coming year will only be 85 percent of the current year sales. Cost of goods sold is estimated to be 90 percent of the current year. The managers have decided to increase advertising next year by 10 percent above the current year, but will cut administrative salaries in the Northern Division by 30 percent. They also expect to lower rent and occupancy costs by 15 percent. Allocated corporate overhead, based on information from the CFO, is expected to be $1.2 million. Required: Prepare an income statement for Year 2 for the Northern Division based on the estimates provided by the cost analyst and other managers at LTH. Note: Enter your answers in thousands e.g., 10,000,000 should be entered as 10,000. Round your answers to 2 decimal places. Enter negative amounts with a minus sign. Sales revenue Costs Cost of goods sold Advertising Administrative salaries LESSING TOY & HOBBY Northern Division Budgeted Income For the Year 2 Ending January 31 ($000) Sales commissions Rent and occupancy expense Allocated corporate support Total costs Net profit (loss) before tax benefit Tax benefit at 25% Net profit (loss) $ $ $ $ $ $ Base 12,040 $ 6,020 $ 490 810 1,624 2,058 1,330 12,332 $ (292) $ (73) (219) $ Budget 10,234.00 5,418.00 539.00 567.00 1,461.00 1,749.00 1,200.00 10,934.00 (151.00) (37.75) (188.75) The managers of Lessing Toy & Hobby (LTH) have decided to keep the stores in the Northern Division open, in spite of the dwindling demand in the area. They want to forecast what the income will be in the coming year, using the income statement as the base. The cost analyst at LTH estimates sales in the coming year will only be 85 percent of the current year sales. Cost of goods sold is estimated to be 90 percent of the current year. The managers have decided to increase advertising next year by 10 percent above the current year, but will cut administrative salaries in the Northern Division by 30 percent. They also expect to lower rent and occupancy costs by 15 percent. Allocated corporate overhead, based on information from the CFO, is expected to be $1.2 million. Required: Prepare an income statement for Year 2 for the Northern Division based on the estimates provided by the cost analyst and other managers at LTH. Note: Enter your answers in thousands e.g., 10,000,000 should be entered as 10,000. Round your answers to 2 decimal places. Enter negative amounts with a minus sign. Sales revenue Costs Cost of goods sold Advertising Administrative salaries LESSING TOY & HOBBY Northern Division Budgeted Income For the Year 2 Ending January 31 ($000) Sales commissions Rent and occupancy expense Allocated corporate support Total costs Net profit (loss) before tax benefit Tax benefit at 25% Net profit (loss) $ $ $ $ $ $ Base 12,040 $ 6,020 $ 490 810 1,624 2,058 1,330 12,332 $ (292) $ (73) (219) $ Budget 10,234.00 5,418.00 539.00 567.00 1,461.00 1,749.00 1,200.00 10,934.00 (151.00) (37.75) (188.75)

Answer rating: 100% (QA)

LESSING TOY HOBBY Northern Division Budgeted Income For the Year 2 Ending January 31 000 Category Ba... View the full answer