Problem 1-47 (Algo) Cost Data for Managerial Purposes (LO 1-3) Palmetto Computer Shop is a small business located on the South Carolina coast. It specializes in computer repair and is known in the area for fast reliable and friendly service. Jeff Branson, the owner and primary repair specialist has been working with computers since he learned about them during his military service. After teaching a class on spreadsheets at the local college, Jeff thinks he might be able to develop a training business to complement the repair work. Jeff has put together some estimates on the impact of a training program on revenues and costs. He estimates that revenues would grow by about 25 percent. Parts costs (mostly for demonstration machines) would increase by about 10 percent and labor costs by about 50 percent. The rent, which is based in part on revenue, would also increase by about 25 percent Utilities would increase by about 30 percent and insurance costs by 15 percent Other costs would increase by 20 percent. Using his spreadsheet skills, Jeff puts together the following estimated annual income statement assuming he offers both repair and training services. Required: -1. Prepare an income statement .-2. Based on the financial impact, should Jeff add training to his current repair business? b. Are there other factors he should consider? Complete this question by entering your answers in the tabs below. Reg A1 Reg A2 Prepare an income statement. Palmetto Computer Shop Annual income Statement Repair and Training Service 480.000 Repair Service Only Costs 103.6201 Parts Labor Rent 180.000 03.000 410 6.440 23.160 44 0 31.920 Total costs Operating profit oss) $ Required: a-1. Prepare an income statement. a-2. Based on the financial impact, should Jeff add training to his current repair business? b. Are there other factors he should consider? Complete this question by entering your answers in the tabs below. Req A1 Reg AZ Req B Based on the financial impact, should Jeff add training to his current repair business? Yes O No ( Reg A1 ReqB > Required: a-1. Prepare an income statement. a-2. Based on the financial impact, should Jeff add training to his current repair business? b. Are there other factors he should consider? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B Are there other factors he should consider? (Select all that apply.) Whether training will lead to customers using Jeff's repair services. What Jeff could make by teaching at the local college. Whether the difference in the estimates is really significant enough to base the decision based on financial estimates. Whether training business requires senior level management for successful implementation. Whether training business will lead to loss of popularity in repair business.
