201-SELF STUDY PROB-WEEK 9-S'12

201-SELF STUDY PROB-WEEK 9-S'12 - $45,000 Less: Cost of...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
#9%:: .;<=>?@ #9%:: ,;<AABCD E A;<FGHI >BC? EXERCISE 14-33 (15 MINUTES) The owner’s analysis incorrectly includes the following allocated costs that will be incurred regardless of whether the ice cream counter is operated: Utilities . ...................................................................................................................... $2,900 Depreciation of building . ......................................................................................... 4,000 Deli manager’s salary . .............................................................................................. 3,000 Total . .......................................................................................................................... $9,900 It is possible that closing the ice cream counter might save a portion of the utility cost, but that is doubtful. A better analysis follows: Sales . ...................................................................................................
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: $45,000 Less: Cost of food . ............................................................................. 20,000 Gross profit . ........................................................................................ 25,000 Less: Operating expenses Wages of counter personnel . .............................................. $12,000 Paper products . ..................................................................... 4,000 Depreciation of counter equipment and furnishings* . ...... 2,500 Total . ...................................................................................... 18,500 Profit on ice cream counter $ 6,500 *Depreciation on the counter equipment and furnishings is included because it is traceable to the ice cream operation and is an expense in the determination of income. If a cash-flow analysis is desired, this noncash expense should be excluded....
View Full Document

This note was uploaded on 02/23/2012 for the course MGMT 201 taught by Professor Rowe during the Spring '08 term at Purdue.

Ask a homework question - tutors are online