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.) $305,000 91,500 105,500 36,500 30,500 18,000 a 2 percent of this cost was wasted due to poor directions given to limo drivers. 15 percent of this cost was for time spent by limo drivers because of poor directions 15 percent of this cost was time taken to address customer complaints The limos have 35 percent unused capacity The building has 15 percent unused capacity. Required: a. Using the traditional income statement format, prepare a value income statement. (Loss amounts should be indicated with a minus sign.) Total DELUXE LIMO SERVICE Value Income Statement For the Month Ending March 31 Nonvalue-added Value-added Activities Activities Sales revenue Cost of services sold: Variable costs of operations, excluding labor costs Employee wages and salaries Fixed cost of automobiles Gross margin (loss) Administrative expenses: Manager salaries Building costs Operating income (loss)

Answer 1

a	Value Income Statement
		Non value added activities	Value added activities	Total
	Sales Revenue		305000	305000
	Cost of services sold:
	Variable costs of operations, excluding labor costs	1830 (91500*2%)	89670 (91500*98%)	91500
	Employee wages and salaries	15825 (105500*15%)	89675 (105500*85%)	105500
	Fixed cost of automobiles	10675 (30500*35%)	19825 (30500*65%)	30500
	Gross margin (loss)	-28330	105830	77500
	Administrative expenses:
	Manager salaries	5475 (36500*15%)	31025 (36500*85%)	36500
	Building costs	2700 (18000*15%)	15300 (18000*85%)	18000
	Operating Income (loss)	-36505	59505	23000

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