Swain Athletic Gear (SAG) operates six retail outlets in a large Midwest city. One is in the center of the city on Cornwall Street and the others are scattered around the perimeter of the city. Management at SAG is concerned about declining sales and profitability of the Cornwall store and believes that outlet has been a drag on profits in recent years. The most recent income statement for the Cornwall store follows.SWAIN ATHLETIC GEARCornwall Street Store Income StatementFor the Year Ending February 28Sales revenue$ 12,300,000Costs Cost of goods sold$ 5,289,000Advertising1,421,000Store administrative salaries975,000Sales commissions1,056,000Leases and utilities2,100,000Allocated corporate support1,622,000Total costs$ 12,463,000Net loss before tax benefit$ (163,000)Tax benefit at 25%(40,750)Net loss$ (122,250)The CFO at SAG has asked for your advice on closing the Cornwall Street store. If the Cornwall Street store is closed, neither total corporate support costs nor operations or costs of the other stores are expected to change.Required:Using the worksheet below, determine which revenues and costs are probably differential for the decision to close the Cornwall Street store.What will be the effect on SAG's income if the Cornwall Street store is closed? . Comwall Street store.Sales revenueCostsCost of goods soldAdvertisingSWAIN ATHLETIC GEARCornwall Street Store Income StatementDifferential Revenues and CostsFor the Year Ending February 28Store administrative salariesSales commissions.Leases and utilitiesAllocated corporate supportTotal costs

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Answered: Comwall Street store. Sales revenue…

Advanced Engineering Mathematics

10th Edition

ISBN:9780470458365

Author:Erwin Kreyszig

Publisher:Erwin Kreyszig

Chapter2: Second-order Linear Odes

Section: Chapter Questions

Problem 1RQ

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Swain Athletic Gear (SAG) operates six retail outlets in a large Midwest city. One is in the center of the city on Cornwall Street and the others are scattered around the perimeter of the city. Management at SAG is concerned about declining sales and profitability of the Cornwall store and believes that outlet has been a drag on profits in recent years. The most recent income statement for the Cornwall store follows.

SWAIN ATHLETIC GEAR
Cornwall Street Store Income Statement
For the Year Ending February 28
Sales revenue	$ 12,300,000
Costs
Cost of goods sold	$ 5,289,000
Advertising	1,421,000
Store administrative salaries	975,000
Sales commissions	1,056,000
Leases and utilities	2,100,000
Allocated corporate support	1,622,000
Total costs	$ 12,463,000
Net loss before tax benefit	$ (163,000)
Tax benefit at 25%	(40,750)
Net loss	$ (122,250)

The CFO at SAG has asked for your advice on closing the Cornwall Street store. If the Cornwall Street store is closed, neither total corporate support costs nor operations or costs of the other stores are expected to change.

Required:

Using the worksheet below, determine which revenues and costs are probably differential for the decision to close the Cornwall Street store.
What will be the effect on SAG's income if the Cornwall Street store is closed?