Buy-U Delis owner is disturbed by the poor profit performance of her ice cream counter. She has
Question:
Buy-U Deli’s owner is disturbed by the poor profit performance of her ice cream counter. She has prepared the following profit analysis for the year just ended:
SASS aso ebend sicece va ee deed ce Pe Ot ES leg ee oe OM ee $45,000 EeSSiHCOSt OO OCIR SEE SOR Ie crete eter cement yore car echt meee ener eee 20,000
(GOSS aP LOTT Rt ee Be el aE ae ee rec readin cet en ner eon ene mer $25,000 Less: Operating expenses:
Wadesiot: counter DEKSOMMEl adic seremcncttceu nie: arenes cece ree aos eecenec ne enema $12,000 Paper products (e€.g., napkins) ..... (é.e2t2 te, Sakece..! cer tee ae 4,000 Utilities (basedronipercentiolisales) eee umeertansenc eea eap nearseeeeoer aeattenr e nce 2,900 Depreciation of counter equipment ANG MUM ISTH Seycctac cee meee eee eeeer ioe 3,000 Depreciation of building (based on percentage Of SaleS) ......... cetera 5,000 Deli manager's salary (based on percentage of time spent on ice cream) oneiaen e 6,000 TOtah@perating CxPenSeSeite cash. iehuumaatn Coyeebtetet eeeeeree renneee eiecr e«eear Re 32,900 Incomen(lGss)ronlice:creamiCOUMLeN: -.ceeekktee tee. tated cata. Sepa on eee eee eee ee $ (7,900)
Required
a. Critique and revise the owner’s analysis as you think appropriate. Justify your changes.
b. Should the owner close the counter? What other factors should she consider before closing it?
Step by Step Answer:
Cost Management Strategies For Business Decisions
ISBN: 12
4th Edition
Authors: Ronald Hilton, Michael Maher, Frank Selto