Question

Marshall Company is a large manufacturer of office furniture. The company has recently adopted lean accounting and has identified two value streams—office chairs and office tables. Total sales in the most recent period for the two streams are $305 and $370 million, respectively.

In the most recent accounting period, Marshall had the following operating costs, which were traced to the two value streams as follows (in thousands):

	Chairs		Tables
Operating costs:
Materials	$	17,700	$	15,700
Labor		135,000		102,500
Equipment-related costs		45,700		65,200
Occupancy costs		11,950		13,800

In addition to the traceable operating costs, the company had manufacturing costs of $176.750 million, and selling and administrative costs of $45 million that could not be traced to either value stream. Due to the implementation of lean methods, the firm has been able to reduce inventory in both value streams significantly. Marshall has calculated the fixed cost of prior period inventory that is included in the current income statement to be $7.0 million for the office chair stream and $25.5 million for the office table stream.

Required:

Prepare, in good form (i.e., using Exhibit 17.17 as a guide), the value-stream income statement for Marshall Company. (Enter your answers in thousands of dollars.)

Required: Prepare, in good form (i.e., using Exhibit 17.17 as a guide), the value-stream income statement for Marshall Company. (Enter your answers in thousands of dollars.) MARSHALL COMPANY Value-Stream Income Statement (000s) Office Chairs Office Tables Total Sales Operating costs: Total operating costs Value-stream profit before inventory change Value-stream profit Less: Nontraceable costs Total nontraceable fixed costs Operating income

Answer 1

H	I	J	K	L	M	N
5.00		MARSHALL COMPANY
6.00
7.00		Value Stream Income Statement (IN THOUSAND)
8.00		Office Chairs		Office Tables		Totals
9.00	Sales		305,000.00		370,000.00	675,000.00
10.00	Operating costs:
11.00	Materials	17,700.00		15,700.00
12.00	Labor	135,000.00		102,500.00
13.00	Equipment related cost	45,700.00		65,200.00
14.00	Occupancy cost	11,950.00		13,800.00
15.00	Total operating cost		210,350.00		197,200.00	407,550.00
16.00	Value stream profit before inventory change		94,650.00		172,800.00	267,450.00
17.00	Less: value of reduction in inventory		7,000.00		25,500.00	32,500.00
18.00	Value stream profit		87,650.00		147,300.00	234,950.00
19.00	Less: Non traceable costs:
20.00	Manufacturing cost					176,750.00
21.00	Selling and administrative cost					45,000.00
22.00	Total non traceable fixed cost					221,750.00
23.00	Operating income					13,200.00

FORMULA

H	I	J	K	L	M	N
5		MARSHALL COMPANY
6
7		Value Stream Income Statement (IN THOUSAND)
8		Office Chairs		Office Tables		Totals
9	Sales		305000		370000	=+K9+M9
10	Operating costs:
11	Materials	17700		15700
12	Labor	135000		102500
13	Equipment related cost	45700		65200
14	Occupancy cost	11950		13800
15	Total operating cost		=SUM(J11:J14)		=SUM(L11:L14)	=+K15+M15
16	Value stream profit before inventory change		=K9-K15		=M9-M15	=+K16+M16
17	Less: value of reduction in inventory		7000		25500	=+K17+M17
18	Value stream profit		=K16-K17		=M16-M17	=+K18+M18
19	Less: Non traceable costs:
20	Manufacturing cost					176750
21	Selling and administrative cost					45000
22	Total non traceable fixed cost					=+N20+N21
23	Operating income					=+N18-N22