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Campus Package Delivery (CPD) provides delivery services in and around Paradise. Its profits have been declining, and management is planning to add an express service
Campus Package Delivery (CPD) provides delivery services in and around Paradise. Its profits have been declining, and management is planning to add an express service that is expected to increase revenue by $335,000 per year. The total cost to lease the necessary additional package delivery vehicles from the local dealer is $23,000 per year. The present manager will continue to supervise all services at no increase in salary. Due to expansion, however, the labor costs and utilities would increase by 50 percent. Rent and other costs will increase by 20 percent. Required: a. Prepare a report of the differential costs and revenues if the express service is added. (Enter all amounts as positive numbers.) Campus Package Delivery Income Statement Status Quo: Alternative: No Express With Express Service Service $ 771,000 Difference Sales revenue Costs Vehicle leases Labor Utilities Rent Other costs Manager's Salary Total costs Operating profit (loss) 311,000 222,000 25,000 67,000 39,000 114,000 778,000 (7,000) $ $ $
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