Case: 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 a budgeted income statement for 2011 based on the information he has collected. Tse's budget follows:
CYCLE WORLD
Budgeted Income Statement
For the Year Ending July 31, 2011 |
|
Sales revenue
|
|
5244,000
|
|
Cant of goods sold
|
|
177,000
|
|
Gross profit
|
|
67,000
|
|
Operating expenses:
|
|
|
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Salary and commission expense
|
46,000
|
|
|
Rent expense
|
8.000
|
|
|
Depreciation expense
|
2,000
|
|
|
Insurance expense
|
800
|
|
|
Miscellaneous expenses
|
12,000
|
68,800
|
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Operating DOSS
|
|
(1,800)
|
|
Interest expense
|
|
1225)
|
|
Net loss
|
|
$ (2,025)
|
Requirement
1. Ise does not want to give Towry this budget without making constructive suggestions for steps Towry could take to improve expected performance. Write a memo to Towry out-lining your suggestions.