Analysis of Operations

Shown below are the results of operations for two years for a locally-owned flower shop. Please note the results are shownin thousands(add three zeros to get the true amounts). Review the results.

Initial Response

Assume you are the manager of the flower shop. Choose two areas that you would investigate further because the numbers appear odd. Maybe the numbers increased significantly. Maybe the numbers did not increase enough.

First,explain why you believe the numbers you chose may need further investigation.

Second,give a legitimate reason why the numbers appear as they do.

Example: Assume the salaries went from $150 in 2019 to $300 in 2020. This appears odd because salary increases are not usually a 100% increase. A cost-of-living salary increase or a 10% raise would be more logical. However, it is possible the company hired additional workers or gave profit-sharing bonuses which could explain the significant increase.

Daisy and Lily's Flower Shop
Income Statement
For years ended 2020 and 2019
(In thousands)
	2020		2019
Sales	8,000	100%	6,000	100%
Cost of Goods Sold	6,000	75%	3,900	65%
Gross Profit	2,000	25%	2,100	35%
Expenses:
Advertising	100	1%	50	1%
Delivery	50	1%	40	1%
Salaries	150	2%	150	3%
Rent	450	6%	250	4%
Insurance	150	2%	125	2%
Utilities	150	2%	100	2%
Total expenses	1,050	13%	715	12%
Other Income (Expense):
Interest Expense	720	9%	450	8%
Income Taxes	46	1%	180	3%
Net Income	184	2%	755	13%
Units Sold	250		250