Question

Davenport Services provides basic marketing and public relations services in a town in the southeast. Lately, the growth in the business has been relatively flat and the managers have been considering new services that might improve their prospects. The sales manager has suggested that adding some "enhanced" services (more personalized attention to the client, greater media access, and so on) might be the approach to pursue. He put together the analysis and was about to present it when he suddenly quit. You have been asked to reconstruct the analysis. The last known spreadsheet with the analysis is shown as follows. You recall that in the last meeting the sales manager estimated that Davenport would probably have to hire some additional employees to do the extra work. He estimated that would add about $21,810 to the monthly labor costs. Required: Fill in the blank cells. (Enter all amounts as positive values.) DAVENPORT SERVICES Projected Income Statement For the Month Status Quo: % Increase Alternative: Current (Decrease) Services Services 20% $ 476,040 Enhanced (Decrease) Difference $ 102,800 $ 10,280 Sales revenue Costs Equipment lease Labor Rent Depreciation Utilities Other Total costs Operating profit % 30 % 20% 5% 113,080 94,510 23,400 22,800 57,800 22,800 $ 98,300 $ 25,300

Answer 1

Income statement is the statement prepared for calculating profit or loss earned by the company during the specific period. All the expenses are deducted from the sales revenue to get profit or loss.

Decrease Services D projected Income statement forth Month Parti cular (status Quo % Increase Alternative (Decrease) En ed Difference sales Revenue (396,700l 20% $476,04 [79,3401 cost Equipment lease $ 102,800 10% $113080 $10,280 Labour $72,700 30% $94.510|$21810 Rent $ 19,500 20% $23, 400/$ 3900 Depreciation 22,800 S% 1$239401 & 1146 lotilities 57,800 other 22.800 Total cost [298400 1$ 2549301 (43470) operating profit ($98,300 $ 220110122,810 Note: Given that our operating operating profit $25,300 but profit differena is $ 122,810 1) calculation of sales Revence and difference status quo- $476040xloo -$396,700 120 Difference = 84 76040 - $396700 = $79,340. 2) calculation of Labour cost and differenu status quo = $94,510x100 $72700 Difference - $94510 - $72,700 = 21,810 130 calculation of Rent and difference status quo = $23,400x1oo. $ 19,500 120 Differenca = $ 19,500 23,400-$19,500 283900 calculation of Depredation and differenca ed Enchanced services $22800x5 Too â 1440 (6 = $2.2800+811402823,940