Question 1 (Points 90) Tiptop 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 67,500 Less: Cost of sales 30,000 Gross profit 37,500 Less: Operating Expenses: Wages of counter staff 18,000 Paper material costs (e.g. Napkins) 6,000 Utilities (allocated) 4,350 Depreciation of counter equipment and furniture 3,750 Depreciation of building (allocated) 6,000 Deli managerial salaries (allocated) 4,500 Total 42,600 Loss on ice cream counter (5,100) Required: 1. In the above owner’s analysis, what costs (amounts) are incorrectly allocated? 2. Show a better analysis and indicate the net financial effect (profit or loss) of dropping the ice cream counter. Question 2 (Points 10) Give two examples of sunk costs, and explain why they are irrelevant in decision making.

Question 1 (Points 90)
Tiptop 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		67,500
Less: Cost of sales		30,000
Gross profit		37,500
Less: Operating Expenses:
Wages of counter staff	18,000
Paper material costs (e.g. Napkins)	6,000
Utilities (allocated)	4,350
Depreciation of counter equipment and furniture	3,750
Depreciation of building (allocated)	6,000
Deli managerial salaries (allocated)	4,500
Total		42,600
Loss on ice cream counter		(5,100)

Required:

In the above owner’s analysis, what costs (amounts) are incorrectly allocated?
Show a better analysis and indicate the net financial effect (profit or loss) of dropping the ice cream counter.

Question 2 (Points 10)
Give two examples of sunk costs, and explain why they are irrelevant in decision making.

Solution:

15% off for this assignment.

Our Prices Start at $11.99. As Our First Client, Use Coupon Code GET15 to claim 15% Discount This Month!!

Why US?

100% Confidentiality

Information about customers is confidential and never disclosed to third parties.

Timely Delivery

No missed deadlines – 97% of assignments are completed in time.

Original Writing

We complete all papers from scratch. You can get a plagiarism report.

Money Back

If you are convinced that our writer has not followed your requirements, feel free to ask for a refund.