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 an budgeted income statement for 20X8 based on the information he has collected. Tse's budget follows:

Cycle World

Budgeted Income Statement

For the Year Ended July 31, 20X8

Net Sales Revenue

$ 244,000

Cost of Goods Sold

177,000

Gross Profit

67,000

Selling and Administrative Expenses:

Salaries and Commissions Expense

$ 46,000

Rent Expense

8,000

Depreciation Expense

2,000

Insurance Expense

800

Miscellaneous Expense

12,000

68,800

Operating Loss

(1,800)

Interest Expense

(225)

Net Income (Loss)

$ (2,025)

Tse does not want to give Towry this budget without making constructive suggestions for steps Towry could take to improve expected performance.

Assume the role of Donna Tse. Write an memo to Towry outlining your suggestions.