Review Decision Case 1 (Donna Tse) located on page 1127in you textbook.

Review Decision Case 1 (Donna Tse) located on page 1127in you textbook. Answer the case question in the Requirements section of the case. Your memo should be at least three paragraphs in length.

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:

Budgeted Income Statement

For the Year Ending July 31, 2011

Sales revenue                                                                                                                                            $244,000

Cost of goods sold                                                                                                                                       177,000

Gross profit                                                                                                                                                    67,000

Operating expense:

Salary and commission expense                                                                         $46,000

Rent expense                                                                                                          8,000

Depreciation expense                                                                                             2,000

Insurance expense                                                                                                    800

Miscellaneous expense                                                                                        12,000                 68,000

Operating loss                                                                                                                                          (1,800)

Interest expense                                                                                                                                       (225)

Net loss                                                                                                                                                    $ (2,025)

Requirement:

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.