Day Street Deli\'s owner is disturbed by the poor profit performance of his ice

Question

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 Less: Cost of food Gross profit Less: Operating expenses: $45,000 20,000 $25,000 Wages of counter personnel Paper products (e.g., napkins) Utilities (allocated) Depreciation of counter equipment and furnishings Depreciation of building (allocated) Deli manager's salary (allocated) Total $12,000 4,000 2,900 2,500 4,000 3,000 28,400 $ (3,400) Loss on ice cream counter Required: Correct the owner's profit analysis for the year just ended Less: Operating expenses Total

Explanation / Answer

the allocated cost should not be included Sales 45,000 cost of food 20,000 Gross profit 25,000 less: operating expense Wages of counter personnel 12,000 paper products 4,000 Depreciation of counter equipment & furnishings 2,500 total 18,500 profit on ice cream counter 6,500

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