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 based on the information he collected. Tse’s budget follows:
Sales Revenue $244,000
Cost of Goods Sold 177,000
Gross Profit $ 67,000
Selling and Admin Expenses:
Salaries and Commissions Expense $46,000
Rent Expense 8,000
Depreciation Expense 2,000
Insurance Expense 800
Miscellaneous Expense 12,000
Total Expenses $68,800
Operating Loss ($1,800)
Interest Expense ($225)
Net 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 a memo to Towry outlining your suggestions.
