this is question pic.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.

LESSING TOY & HOBBY

Northern Division

For the Year Ending January $31$

$($$$000)$

Sales revenue

Costs

Cost $of$ goods sold $$6,020$

$490$

Advertising $490$

Admintalies $810$

Administrative salaries $1,624$

Sales commissions $2,658$

Rent and occupancy expense $2,058$

Allocated corporate support

Total costs

Net loss before tax benefit

Tax benefit at $25\%$

Net loss

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\mathrm{.}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.