Managerial Accounting: E14-31 Day Street Deli’s owner is disturbed by the poor profit performance

Managerial Accounting

Exercise 14-31 Drop Product Line
Day Street Deli’s owner is disturbed by the poor profit performance of his ice cream counter. He has prepared the following profit analysis for the year just ended.
Sales 67,500
Less: Cost of food (30,000)
Gross profit 37,500
Less: Operating expenses:
Wages of counter personnel 18,000
Paper products (e.g., napkins) 6,000
Utilities (allocated) 4,350
Depreciation of counter equipment and furnishings 3,750
Depreciation of building (allocated) 6,000
Deli manager’s salary (allocated) 4,500
Total 42,600
Loss on ice cream counter (5,100)

Required: Criticize and correct the owner’s analysis
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