Day Street Delis owner is disturbed by the poor profit performance of his ice cream counter. He
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Sales ....................... $ 45,000
Less: Cost of food ........ .......... 20,000
Gross profit ....................... $25,000
Less: Operating expenses:
Wages of counter personnel ........... $12,000
Paper products (e.g., napkins) ........... 4,000
Utilities (allocated) ............... 2,900
Depreciation of counter equipment and furnishing...... 2,500
Depreciation of building (allocated) ........ 4,000
Deli manager’s salary (allocated) ......... 3,000
Total ..................... 28,400
Loss on ice cream counters ................ $ (3,400)
Required:
Criticize and correct the owner’s analysis.
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