DeLuxe Limo Service has the following information for March: Sales revenue Varia

Question

DeLuxe Limo Service has the following information for March: Sales revenue Variable costs of operations, excluding labor costs Employee wages and salaries Manager salaries Fixed cost of automobiles Building costs (rent, utilities, etc.) s 250,000 75,000 100,000 20,000 25,000 12,500 a 5 percent of this cost was wasted due to poor directions given to limo drivers. b 5 percent of this cost was for time spent by limo drivers because of poor directions. C 10 percent of this cost was time taken to address customer complaints. d The limos have 40 percent unused capacity. e The building has 10 percent unused c apacity Required: a. Using the traditional income statement format, prepare a value income statement. (Loss amounts should b DELUXE LIMO SE Value Income Statement For the Month Ending March 31 Value-added Total Sales revenue Cost of services sold: Variable costs of operations, excluding labor costs Employee wages and salaries Fixed cost of Gross margin (loss) Administrative expenses: Manager salaries Building costs Operating income (loss) b. What value would there be to the managers at DeLuxe from preparing the same information in April? O Preparing a April statement helps DeLuxe see whether he is improving in reducing nonvalue-added activities. Preparing a April statement helps DeLuxe see whether he is improving in reducing value-added activities.

Explanation / Answer

a Value Income Statement Nonvalue added activities Value added activities Total Sales Revenue 250000 250000 Cost of services sold: Variable costs of operations, excluding labor costs 3750 71250 75000 Employee wages and salaries 5000 95000 100000 Fixed cost of automobiles 10000 15000 25000 Gross margin (loss) -18750 68750 50000 Administrative expenses:    Manager salaries 2000 18000 20000    Building costs 1250 11250 12500 Operating Income (loss) -22000 39500 17500 b Preparing a April statement helps DeLuxe see whether he is improving in reducing nonvalue­added activities

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