Caresco Associates prepares architectural drawings to conform to local structural-safety codes. (Click the icon to view the income statement.) (Click the icon to view the percentage of time spent on activities.) Assume administrative and support coats vary with professional-labor costs. Consider each requirement independently. Read the requirements Requirement 1. How much of the total costs in 2020 are value-added, non-value-added, or in the gray area between? Explain your answers briefly. What actions can Carasco take to reduce its costs? Begin by calculating the total labor costs, then calculate the total costs. (If an input field is not used in the table, leave the input field empty; do not enter a zero. Round your answers to the nearest whole dollar.) Gray Value- Added Area Non-value -Added Total Making calculations and preparing drawings Checking calculations and drawings Correcting errors found in drawings Making changes in response to client requests Correcting errore to meet govemment building code Total professional labor Data table The percentage of time spent by professional staff on various activities follows: Data table Its income statement for 2020 is as follows: $ 705,915 Making calculations and preparing drawings for clients Checking calculations and drawings 74% Revenues Correcting errors found in drawings (not billed to clients) B Salaries of professional staff (8,100 hours * $55 per hour) Travel 445,500 16,000 Making changes in response to client requests (billed to clients) Correcting own errors regarding building codes (not billed to clients) G Administrative and support costs 187,110 9 Total costs 648,010 100% Total Operating income $ 57,305 Print Done Print Done Requirements 1. How much of the total costs in 2020 are value-added, non-value-added, or in the gray area between? Explain your answers briefly. What actions can Carasco take to reduce its costs? 2. What are the consequences of misclassifying a non-value-added cost as a value-added cost? When in doubt, would you classify a cost as a value-added or non-value-added cost? Explain briefly. 3. Suppose Carasco could eliminate all errors so that it did not need to spend any time making corrections and, as a result, could proportionately reduce professional-labor costs. Calculate Carasco's operating income for 2020. 4. Now suppose Carasco could take on as much business as it could complete, but it could not add more professional staff. Assume Carasco could eliminate all errors so that it does not need to spend any time correcting errors. Assume Caresco could use the time saved to Increase revenues proportionately. Assume travel costs will remain at $16,000. Calculate Carasco's operating income for 2020. Print Done Clear all Check answer