Case 09-8 Classified Information
Case 09-8
Classified Information
Lads and Lassies (L&L), an SEC registrant, has its year end on the Saturday closest to
January 31. Fiscal 2012, 2011, and 2010, which include 52 weeks each, ended on January
28, 2012, January 29, 2011, and January 30, 2010, respectively.
L&L manufactures and sells exclusive children’s clothing to the most discerning clientele. Its products offer high quality and modern style, including everything from a colorful collection of cashmere sweaters to perfect vintage washed tees. The products are sold through its boutiques, each of which resembles a New England seaside cottage.
The boutiques also include the Sassy Spa for Spoiled Pip-Squeaks (Sassy Spa), which was introduced in the third quarter of fiscal 2011. These spas for children offer hair and nail care, make-up application, massage services, and even etiquette classes.
L&L has the following information that needs to be analyzed to determine the appropriate income statement presentation.
1. Net Sales
L&L had net sales of $74.5 million in fiscal 2011 and $86.5 million in fiscal 2012; an increase of $12 million, or 16.1 percent. The increase in net sales was driven, in part, by an increase in revenue from services provided by Sassy Spa, which increased from $3.9 million in fiscal 2011 to $11.2 million in fiscal 2012. The remaining increase in total net sales of $4.7 million was because of an increase in the average transaction value, driven by higher average retail sales on a per unit basis due to the favorable customer response to the use of more vintage prints in its garments.
2. Gross Profit
Gross profit, which represents net sales less cost of sales, increased from $28 million in fiscal 2011 to $30.4 million in fiscal 2012; an increase of $2.4 million, or 8.6 percent.
Cost of sales includes expenses incurred to acquire and produce inventory for sale, such as product costs, freight-in and import costs, and direct labor costs for Sassy Spa
employees.
Classified Information
Lads and Lassies (L&L), an SEC registrant, has its year end on the Saturday closest to
January 31. Fiscal 2012, 2011, and 2010, which include 52 weeks each, ended on January
28, 2012, January 29, 2011, and January 30, 2010, respectively.
L&L manufactures and sells exclusive children’s clothing to the most discerning clientele. Its products offer high quality and modern style, including everything from a colorful collection of cashmere sweaters to perfect vintage washed tees. The products are sold through its boutiques, each of which resembles a New England seaside cottage.
The boutiques also include the Sassy Spa for Spoiled Pip-Squeaks (Sassy Spa), which was introduced in the third quarter of fiscal 2011. These spas for children offer hair and nail care, make-up application, massage services, and even etiquette classes.
L&L has the following information that needs to be analyzed to determine the appropriate income statement presentation.
1. Net Sales
L&L had net sales of $74.5 million in fiscal 2011 and $86.5 million in fiscal 2012; an increase of $12 million, or 16.1 percent. The increase in net sales was driven, in part, by an increase in revenue from services provided by Sassy Spa, which increased from $3.9 million in fiscal 2011 to $11.2 million in fiscal 2012. The remaining increase in total net sales of $4.7 million was because of an increase in the average transaction value, driven by higher average retail sales on a per unit basis due to the favorable customer response to the use of more vintage prints in its garments.
2. Gross Profit
Gross profit, which represents net sales less cost of sales, increased from $28 million in fiscal 2011 to $30.4 million in fiscal 2012; an increase of $2.4 million, or 8.6 percent.
Cost of sales includes expenses incurred to acquire and produce inventory for sale, such as product costs, freight-in and import costs, and direct labor costs for Sassy Spa
employees.