Question
Problem 1: (10 points) Travons Limo Service provides transportation services in and around Bentonville. Its profits have been declining, and management is planning to add
Problem 1: (10 points)
Travons Limo Service provides transportation services in and around Bentonville. Its profits have been declining, and management is planning to add a package delivery service that is expected to increase revenue by $275,000 per year. The total cost to lease additional delivery vehicles from the local dealer is $60,000 per year. The present manager will continue to supervise all services. However, labor and utilities costs will increase by 40% and rent and other costs will increase by 15% when the package delivery service is added.
Travons Limo Service
Annual Income Statement
Before Expansion
Sales Revenue $960,000
Costs:
Vehicle leases $400,000
Labor 290,000
Utilities 50,000
Rent 100,000
Other Costs 60,000
Managers Salary 120,000
Total Costs 1,020,000
Operating Loss $ (60,000)
Required:
- Prepare a report of the differential costs and revenues if the delivery service is added.
Problem 2: (10 points)
Michael Corporation has provided the following data for the month of July:
Sales $280,000
Raw materials purchases 76,000
Direct labor costs 42,000
Manufacturing overhead 77,000
Selling expenses 20,000
Administrative expense 35,000
Inventories: Beginning Ending
Raw materials $22,000 $33,000
Work-in-process 15,000 23,000
Finished goods 52,000 43,000
Required:
- Prepare a Statement of Cost of Goods Manufactured for July.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started