DeLuxe Limo Service has the following information for March.
| Sales revenue | $ | 310,000 | |
| Variable costs of operations, excluding laborcostsa | | 93,000 | |
| Employee wages and salariesb | | 106,000 | |
| Manager salariesc | | 38,000 | |
| Fixed cost of automobilesd | | 31,000 | |
| Building costs (rent, utilities, etc.)e | | 18,500 | |
|
a 5 percent of this cost was wasted due to poordirections given to limo drivers.
b 5 percent of this cost was for time spent by limodrivers because of poor directions.
c 10 percent of this cost was time taken to addresscustomer complaints.
d The limos have 40 percent unused capacity.
e The building has 10 percent unused capacity
a. Using the traditional income statementformat, prepare a value income statement. (Loss amountsshould be indicated with a minus sign.)
|
| | DELUXE LIMO SERVICE | | Value Income Statement | | For the Month Ending March 31 | | Nonvalue-added Activities | Value-added Activities | Total | | Sales revenue | | | | | Cost of services sold: | | | | | Variable costs of operations, excludinglabor costs | | | | | Employee wages and salaries | | | | | Fixed cost of automobiles | | | | | Gross margin (loss) | | | | | Administrative expenses: | | | | | Manager salaries | | | | | Building costs | | | | | Operating income (loss) |
|
What value would there be to the managers at DeLuxe frompreparing the same information in April?
A. Preparing a April statement helps DeLuxe see whether he isimproving in reducing nonvalue-added activities.
B. Preparing a April statement helps DeLuxe see whether he isimproving in reducing value-added activities.
