Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 12

Value Income Statement (L.O. 7)

Gene’s Diner has the following information for October, when several new employees were added to the waitstaff:

Sales revenue	$180,000
Cost of food serveda	60,000
Employee wages and salariesb	45,000
Manager salariesc	18,000
Building costs (rent, utilities, etc.)d	27,000

a 5 percent of this cost was for food that was not used by the expiration date and 10 percent was for food that was incorrectly prepared because of errors in orders taken.

 b 15 percent of this cost was for time spent by cooks to reprepare orders that were incorrectly prepared because of errors in orders taken.

c 20 percent of this cost was time taken to address customer complaints about incorrect orders.

d 80 percent of the building was used.

 Required

a. Using the traditional income statement format, prepare a value income statement.

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b. What value would there be to Gene from preparing the same information in November?

Step 1 of 4

Value added income statement

Value added income statement is traditional income statement which is divided into value added and non-value added activities. Value added activities are costs which add value to the company and are necessary to undertake business operation. Non-value added activities are wastage or other expenses incurred which do not help in generating revenue for company.