MEMO

Assignment
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
$244,000
Cost of goods sold
177,000
Gross profit
Operating expenses:
Salary and commission expense
Salary expense
Depreciation expense
Insurance expense
Miscellaneous expenses
Operating loss
(1,800)
Interest expense
(225)
Net loss
$(2,025)

67,000
$46,000
8,000
2,000
800
12,000

68,000

Requirement
1. Tse 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
outlining your suggestions.