Question 3 (10 marks)

Tania is the owner of a beauty salon called Forever Beauty. Tania has been concerned with

the declining profit of the eyebrow waxing part of her business. She doesn't have much

knowledgeabout accounting but learnt a few basic things from a friend. She prepared

thefollowingprofit & loss statement to see if she should drop eyebrow waxing services

from herbusiness.

Service revenue (waxing)$75 500

Operating expenses:

Wax$6 879

Waxing cloth$4 500

Utilities- allocated$5 000

Wages of two beauticians (waxing only) $30 000

Depreciation of building-allocated $15 000

Salon manager's salary-allocated $18 500

Depreciation equipment-allocated $3 400

Depreciation waxing equipment $3400

Total expenses$86 679

Loss on waxing services($11 179)

Required:

1.Comment on the above profit and loss statement prepared by Tania. (3 marks)

2.Prepare correct analysis (profit and loss statement with the expenses that should be

relevant to the decision making).(6 marks)

3.Should the waxing service be dropped from the business? (1 mark)