Problem - Drop Product line: retailer
George Street Deli's owner in disturbed by the poor profit performance of his gelato bar. He has prepared the following profit analysis:
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Sales
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$67,500
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Less Cost of food
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30,000
|
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Gross margin
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$37,500
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Less Operating expenses:
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|
|
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Wages of counter staff
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$18,000
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|
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Paper products (e.g. serviettes)
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6,000
|
|
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Utilities (allocated)
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4,350
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|
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Depreciation of counter equipment and furnishings
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3,750
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|
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Depreciation of building (allocated)
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6,000
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|
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Deli manager's salary (allocated)
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4,500
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|
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Total expenses
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42,600
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Loss on gelato bar
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$(5,100)
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Required:
1. Evaluate the above analysis that has been prepared by the manager.
2. Provide a correct analysis and assess whether or not the gelato bar should be continued.