Department closing. Prior to last year, LPJ Wholesalers Company had not kept departmental income statements. To achieve better management control, the company decided to install department-by-department accounts. At the end of last year, the new accounts showed that although the business as a whole was profitable, the Dry Goods Department had shown a substantial loss. The income statement for the Dry Goods Department, shown here, reports on operations for last year.

Analysis of these results has led management to suggest that it close the Dry Goods Department. Members of the management team agree that keeping the Dry Goods Department is not essential to maintaining good customer relations and supporting the rest of the company's business. In other words, eliminating the Dry Goods Department is not expected to affect the amount of business done by the other departments.
What action do you recommend to management of LPJ Wholesalers Company in the short run? Why ?

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LPJ WHOLESALERS COMPANY Dry Goods Department Partial Income Statement Sales Cost of Goods Sold Gross Margin. Costs: Payroll, Direct Labor, and Supervision Commissions of Sales Staff". Rent.. State Taxes Insurance on Inventory Depreciation.. Administration and General Office". Interest for Inventory Carrying Costs' Total Costs... Loss before Allocation of Income Taxes $250,000 187,500 $62,500 $ 16,500 15,000 13,000 1,500 2,000 3,500 11,000 2,500 65,000 $ (2,500)