Drop Product Line
Day Street Deli’s owner is disturbed by the poor profit performance of his ice cream counter. He has prepared the following profit analysis for the year just ended.
Sales |
| $45,000 |
Less: Cost of food |
| 20,000 |
Gross Profit |
| $25,000 |
Less: Operating expenses: |
|
|
Wages of counter personnel | $12,000 |
|
Utilities (allocated) | 2,900 |
|
Depreciation of counter equipment and furnishings | 2,500 |
|
Depreciation of building (allocated) | 4,000 |
|
Deil manager’s salary (allocated) | 3,000 |
|
Total |
| 28,400 |
Loss on ice cream counter |
| $ (3,400) |
Required: Criticize and correct the owner’s analysis.
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