30 Jun drop cost
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. SalesLess: Cost of salesGross profitLess: Operating Expenses:Wages of counter staffPaper material costs (e.g. Napkins)Utilities (allocated)Depreciation of counter equipment and furniture Depreciation of building (allocated)Deli managerial salaries (allocated)TotalLoss on ice cream counterRequired:$$ 67,50030,000 37,50042,600 (5,100)incorrectly 18,000 6,000 4,350 3,750 6,000 4,500 1. In the above owner’s analysis, what costs (amounts) are 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
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