Chanaka 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 costs vary with professional-labor costs. Consider each requirement independently. Read the requirements. Requirement 1. How much of the total costs in 2017 are value-added, non-value-added, or in the gray area between? Explain your answers briefly. What actions can Chanaka take to reduce its costs? Begin by calculating the total labor costs, then calculate the total costs. (If a box is not used in the table, leave the box empty; do not enter a zero. Round your answers to the nearest whole dollar.) Value- Gray Non-value Added Area -Added Total Making calculations and preparing drawings Checking calculations and drawings Correcting errors found in drawings Making changes in response to client requests Correcting errors to meet government building code Total professional labor costs - 1 ctivities.) Data table Data table endently. Its income statement for 2017 is as follows: The percentage of time spent by professional staff on various activities follows: $ 714,000 75 % tween? Explain 4 394,800 Revenues Salaries of professional staff (8,400 hours * $47 per hour) Travel Administrative and support costs the box empty; 8 22,000 177,660 Making calculations and preparing drawings for clients Checking calculations and drawings Correcting errors found in drawings (not billed to clients) Making changes in response to client requests (billed to clients) Correcting own errors regarding building codes (not billed to clients) 6 594,460 7 Total costs $ 119,540 100 % Operating income Total Print Done Print Done Requirements 1. How much of the total costs in 2017 are value-added, non-value-added, or in the gray area between? Explain your answers briefly. What actions can Chanaka 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 Chanaka 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 Chanaka's operating income for 2017. 4. Now suppose Chanaka could take on as much business as it could complete, but it could not add more professional staff. Assume Chanaka could eliminate all errors so that it does not need to spend any time correcting errors. Assume Chanaka could use the time saved to increase revenues proportionately. Assume travel costs will remain at $22,000. Calculate Chanaka's operating income for 2017. Print Done