Data table Its income statement for 2017 is as follows: Revenues Salaries of professional staff (7,900 hours * $55 per hour) Travel Administrative and support costs Total costs Operating income Total professional labor costs Print Done of time spent on activities.) quirement independently. $ 637,925 $ 434,500 22,000 173,800 630,300 7,625 the gray area between? Explain your answers briefly. What ac the table, leave the box empty; do not enter a zero. Round you Total Data table 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 Colbert 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 Colbert 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 Colbert's operating income for 2017. 4. Now suppose Colbert could take on as much business as it could complete, but it could not add more professional staff. Assume Colbert could eliminate all errors so that it does not need to spend any time correcting errors. Assume Colbert could use the time saved to increase revenues proportionately. Assume travel costs will remain at $22,000. Calculate Colbert's operating income for 2017. The percentage of time spent by professional staff on various activities follows: Print Done Making calculations and preparing drawings for clients 77 % Checking calculations and drawings 3 Correcting errors found in drawings (not billed to clients) 7 Making changes in response to client requests (billed to clients) Correcting own errors regarding building codes (not billed to clients) 5 8 Help me solve this Etext pages Get more help Clear all Check answer 100 % Total 2. Colbert Associates prepares architectural drawings to conform to local structural-safety codes. 1(Click the icon to view the income statement.) 2(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 Colbert 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.) Making calculations and preparing drawings Checking calculations and drawings Correcting errors found in drawings Value- Gray Added Area Non-value -Added Total Making changes in response to client requests Correcting errors to meet government building code Total professional labor costs Administrative and support costs Travel Total Select the appropriate cost classification, then select the action that Colbert can take to reduce its costs. Doing calculations and responding to client requests for changes (1) because customers (2) Costs incurred on correcting errors in drawings and making changes because they were inconsistent with building codes (3) Checking calculations and drawings (5) There (6) Colbert should seek to eliminate these costs by making sure (7) for disagreement on these classifications. for the service of preparing architectural drawings. Customers (4). for them. Requirement 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. The consequences of misclassifying a non-value-added cost as a value-added cost are the managers: (Select two that apply.) A. Might not reduce a cost that supports activities a customer does not value. B. Might reduce costs that provide value or utility (usefulness) customer experiences believing these experiences are not important to the customer. C. May hesitate to reduce these costs thinking that if they eliminate the cost it would reduce the value of customers experience from using the product or service. D. Might try to reduce any costs that supports activities the customer does not value. When in doubt, would you classify a cost as a value-added or non-value-added cost? Explain briefly. When in doubt, a manager often classifies costs as a (8) because it (9) Requirement 3. Suppose Colbert 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 Colbert's operating income for 2017. (Round your answers to the nearest whole dollar.) Current operating income Cost savings in professional labor costs Cost savings in variable administrative and support costs Add: Total cost savings Operating income in 2017 if errors eliminated Print Requirement 4. Now suppose Colbert could take on as much business as it could complete, but it could not add more professional staff. Assume Colbert could eliminate all errors so that it does not need to spend any time correcting errors. Assume Colbert could use the time saved to increase revenues proportionately. Assume travel costs will remain at $22,000. Calculate Colbert's operating income for 2017. Revenues Professional labor costs Travel Administrative and support costs Total costs Operating income 1: Data Table Its income statement for 2017 is as follows: $ 637,925 Revenues Salaries of professional staff (7,900 hours * $55 per hour) Travel 434,500 22,000 173,800 Administrative and support costs Total costs 630,300 Total costs Operating income $ 7,625 2: Data Table The percentage of time spent by professional staff on various activities follows: 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) 3: Requirements Total 77 % 3 7 5 8 100% 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 Colbert 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 Colbert 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 Colbert's operating income for 2017. 4. Now suppose Colbert could take on as much business as it could complete, but it could not add more professional staff. Assume Colbert could eliminate all errors so that it does not need to spend any time correcting errors. Assume Colbert could use the time saved to increase revenues proportionately. Assume travel costs will remain at $22,000. Calculate Colbert's operating income for 2017. (1) are non-value-added costs are value-added costs (2) O do not perceive these costs as necessary (3) are non-value-added costs. perceive these costs as necessary are value-added costs. are in the gray area are in the gray area. (4) do not perceive these costs as necessary and would be unwilling to pay perceive these costs as necessary and would be willing to pay (5) O are non-value-added costs (6) O are value-added costs is no room Is room O is in the gray area (7) O all costs are value-added costs. O associates are well-informed and by training associates. O associates only work minimum hours and costs are converted to value-added only. only a few associates are working at a time. (8) non-value-added cost O value-added cost (9) focuses organization attention on cost reduction. will create a positive customer experience