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29.07.2022 - 23:43

Stockholders of Poppa Rollo’s Pizza have prospered during the company’s second year of operation. In order to help with decisions about whether to open another pizzeria, Poppa Rollo’s Pizza has prepared the current income statement of the business. Jan Lo

Question:

Stockholders of Poppa Rollo’s Pizza have prospered during the company’s second year of operation. In order to help with decisions about whether to open another pizzeria, Poppa Rollo’s Pizza has prepared the current income statement of the business. Jan Lorange, the controller, read in an industry trade journal that a successful two year old pizzeria meets the following criteria:

a. Gross profit percentage is at least 60%.

b. Net income is at least $90,000.

c. Are they meeting these criteria?

POPPA ROLLO’S PIZZA
Income Statement
Year Ended December 31, 2015
Sales Revenue	$195,000
Gain on Sale of Land	24,600
Total Revenue	219,600
Cost of Goods Sold	85,200
Gross Profit	134,400
Operating Expenses:
Salaries Expense	35,600
Interest Expense	6,000
Depreciation Expense	4,800
Utilities Expense	3,700
Total Operating Expense	50,100
Income from Operations	84,300
Other Revenue
Sales Returns	10,700
Net Income	$95,000

Answers (1)

Syble April 12, 2023 в 07:17

Yes, Poppa Rollo's Pizza is meeting the criteria for a successful two year old pizzeria based on the income statement provided. a. The gross profit percentage is calculated by dividing the gross profit by the total revenue: Gross profit percentage = (Gross profit ? Total revenue) x 100 = ($134,400 ? $219,600) x 100 = 61.24% Therefore, the gross profit percentage is at least 60%, which meets the first criterion. b. The net income is $95,000, which is higher than the required minimum of $90,000. Therefore, the second criterion is also met. Overall, Poppa Rollo's Pizza satisfies both criteria for a successful two year old pizzeria, which may indicate that it's a good decision to open another pizzeria.

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