Question: When Will It Be Available ?The 2012 and 2013 income statements for Webster Stores follow. Webster Stores is an e-retailer that sells high-end clothing over the Internet. Although its website has generated high sales, Webster Stores has lost money over the last two years, but sales have increased. Bill Forrester, the general manager, predicts the company will be profitable in 2014 and sales for 2014 will be up between 15 percent and 20 percent over sales in 2003. During 2004, the site was attacked by hackers from Animal Friends who objected to the fur on several of the jackets sold on the website. The website was shut down for one day. The disabling of the site is a significant loss for Webster Stores. Because of the branding of its products Webster believes that some customers will return to the website to make future purchases. The disabling of Webster's website has created both lost sales for Webster as well as an unavailability loss. 2012 2013 Sales $11,000,000 $14,000,000 Less: Cost of Sales 8,250,000 10,920,000 Gross Margin $ 2,750,000 $ 3,080,000 Less:
Operating Expenses 3,000,000 3,100,000 Operating Profit ($250,000) ($20,000) Less: Taxes - - Net Income ($250,000) ($20,000)
a. Using the comparative 2002 and 2003 summary income statements, discuss the best income statement statistic to use in evaluating the unavailability loss for 2004.
b. Determine the unavailability loss from Webster's disabled website from the measure decided on in Part (a).