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. Exercise $1-31($Algo$)$ Cost Data for Managerial Purposes $($LO $1-3)$

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.

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:

a$.$ Using the worksheet below, determine which revenues and costs are probably differential for the decision to close the Cornwall

Street store.

b$.$ What will be the effect on SAG's income if the Cornwall Street store is closed?

Complete this question by entering your answers in the tabs below.

Using the worksheet below, determine which revenues and costs are probably differential for the decision to close the

Cornwall Street store. Exercise $1-31($Algo$)$ Cost Data for Managerial Purposes $($LO $1-3)$

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.

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:

a$.$ Using the worksheet below, determine which revenues and costs are probably differential for the decision to close the Cornwall

Street store.

b$.$ What will be the effect on SAG's income if the Cornwall Street store is closed?

Complete this question by entering your answers in the tabs below.

Required $B$

What will be the effect on SAG's income if the Cornwall Street store is closed?

by

SWAIN ATHLETIC GEAR

Cornwall Street Store Income Statement

For the Year Ending February $28$

Sales revenue $ $12,800,000$

Costs

Cost of goods sold $ $5,789,000$

Advertising $1,426,000$

Store administrative salaries $980,000$

Sales commissions $1,061,000$

Leases and utilities $2,105,000$

Allocated corporate support $1,627,000$

Total costs $ $12,988,000$

Net loss before tax benefit $ $(188,000)$

Tax benefit at $25\%(47,000)$

Net loss $ $(141,000)$

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?