accounting

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_______________________________________________________________$45,000

Less: Cost of food____________________________________________________ 20,000

Gross Profit $25,000

Less: Operating expenses:

Wages of counter personnel_____________________________________$12,000

Paper products (e.g. napkins)____________________________________ 4,000

Utilities (allocated)____________________________________________ 2,900

Depreciation of counter equipment and furnishings__________________ 2,500

Depreciation of building (allocated)_______________________________ 4,000

Deli manager’s salary (allocated)_________________________________ 3,000

Total 28,400

Loss on ice cream counter $(3,400)

Required: Criticize and correct the owner’s analysis.