Exercise $1-35($Static$)$ Cost Data for Managerial Purposes$-$Budgeting

Lessing Toy and Hobby $($LTH$)$ is a chain of hobby and craft stores in the Southeast. LTH operates multiple stores and is

organized into two divisions: Northern and Southern. Individual stores are placed in one or the other division based on

geography. Recent demographic changes in the Northern Division area have led to declining foot traffic and sales in

the LTH stores. Senior corporate executives have been asking whether the chain should close those stores and focus

on the stores in the Southern Division. The most recent income statement for the Northern Division follows.

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 bv $30$ percent. Thev also expect to lower rent and occupancv costs bv $15$ percent. Allocated

Prepare an income statement for Year $2$ for the Northern Division based on the estimates provided by the cost analys

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.