Donna Tse recently joined Cycle World, a bicycle store in Dartmouth, as an assistant manager. She recently finished her accounting courses. Cycle World€™s manager and owner, Jeff Towry, asks Tse to prepare a budgeted income statement for the upcoming year based on the information he has collected. Tse€™s budget follows:

Requirement
Tse does not want to give Towry this budget without making constructive suggestions for steps Towry could take to improve expected performance. Write a memo to Towry outlining your suggestions. Your memo should take the following form:
Date:
To: Mr. Jeff Towry, Manager
Cycle World
From: Donna Tse
Subject: Cycle World€™s budgeted income statement
 

CYCLE WORLD Budgeted Income Statement For the Year Ending July 31 Sales revenue.. $244,000 Cost of goods sold.. Gross profit.. Operating expenses: Salary and commission expense 177,000 67,000 $46,000 Rent expense.. 8,000 Depreciation expense. 2,000 Insurance expense . 800 Miscellaneous expenses. 12,000 68,800 (1,800) Operating loss. Interest expense. 22.5 Net loss 5 (2,025)