Donna Tse has recently accepted the position of assistant manager at Cycle World, a bicycle store in St. Louis. She has just finished her accounting courses. Cycle World€™s manager and owner, Jeff Towry, asks Tse to prepare a budgeted income statement for 2015 based on the information he has collected. Tse€™s budget follows:

Requirement
1. 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 yoursuggestions.

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CYCLE WORLD Budgeted Income Statement For the Year Ending July 31, 2015 Sales revenue $244,000 Cost of goods sold Gross profit 177,000 $ 67,000 Operating expenses: Salary and commission expense $46,000 Rent expense Depreciation expense 8,000 2,000 Insurance expense 800 Miscellancous expenses 12,000 68,800 $ (1,800) Operating loss Interest expense (225) $ (2,025) Net loss