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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 division's: 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 and Hobby Northern Division For the Year Ending January 31 ($000) Sales revenue Costs Cost of goods sold Advertising Administrative salaries $ 13,740 $7,720 507 827

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 division's: 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 and Hobby Northern Division For the Year Ending January 31 ($000) Sales revenue Costs Cost of goods sold Advertising Administrative salaries $ 13,740 $7,720 507 827

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 division's: 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 and Hobby Northern Division For the Year Ending January 31 ($000) Sales revenue Costs Cost of goods sold Advertising Administrative salaries Sales commissions Rent and occupancy expense Allocated corporate support Total costs Net loss before tax benefit Tax benefit at 25% Net loss. $ 13,740 $ 7,720 507 827 1,641 2,075 1,347 $ 14,117 $ (377) (94.25) $ (282.75) The CEO has asked for your thoughts on the decision to close the Northern Division stores. If the Northern Division is eliminated and the stores closed, neither total corporate support costs nor operations or costs of the Southern Division stores are expected to change.
Transcribed Image Text: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 division's: 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 and Hobby Northern Division For the Year Ending January 31 ($000) Sales revenue Costs Cost of goods sold Advertising Administrative salaries Sales commissions Rent and occupancy expense Allocated corporate support Total costs Net loss before tax benefit Tax benefit at 25% Net loss. $ 13,740 $ 7,720 507 827 1,641 2,075 1,347 $ 14,117 $ (377) (94.25) $ (282.75) The CEO has asked for your thoughts on the decision to close the Northern Division stores. If the Northern Division is eliminated and the stores closed, neither total corporate support costs nor operations or costs of the Southern Division stores are expected to change.
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