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: he owner is thinking the elimination of this counter. If it is eliminated then: ✓ Depreciation of counter equipment is avoidable ✓ The supervisory salaries is avoidable ✓ The insurance expense is unavoidable ✓ The depreciation of building unavoidable ✓ The general overhead is unavoidable Required: a) Should the company eliminate the counter or not? Show your calculations and justify your answer. b) Mention at least three relevant costs.
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: he owner is thinking the elimination of this counter. If it is eliminated then: ✓ Depreciation of counter equipment is avoidable ✓ The supervisory salaries is avoidable ✓ The insurance expense is unavoidable ✓ The depreciation of building unavoidable ✓ The general overhead is unavoidable Required: a) Should the company eliminate the counter or not? Show your calculations and justify your answer. b) Mention at least three relevant costs.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:
he owner is thinking the elimination of this counter. If it is eliminated then:
✓ Depreciation of counter equipment is avoidable
✓ The supervisory salaries is avoidable
✓ The insurance expense is unavoidable
✓ The depreciation of building unavoidable
✓ The general overhead is unavoidable
Required:
a) Should the company eliminate the counter or not? Show your calculations and justify your answer.
b) Mention at least three relevant costs.
Transcribed Image Text:Sales Revenues
Less: Variable expenses
554,000
Direct Material
190,000
Direct Labor
130,000
120,000
Variable Overhead
Contribution margin
Less: Fixed expenses
Depreciation of counter
equipment
Supervisory salaries
114,000
10,000
50,000
15,000
Insurance
Depreciation of building
(allocated)
10,000
General overhead
30,000
(allocated)
Cmerican College900he Mid
Net loss
(1,000)
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