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

Exercise 13

Value Income Statement

Paul’s Limo Service has the following information for June:

	A	B	?C	?D
1
2	Sales revenue	$ 50,000
3	Variable costs of operations, excluding labor costsa	15,000
4	Employee wages and salariesb	20,000
5	Manager salariesc	4,000
6	Fixed cost of automobilesd	5,000
7	Building costs (rent, utilities, etc.)e	2,500
8
9	a5 percent of this cost was wasted due to poor directions given to limo drivers.
10	b5 percent of this cost was for time spent by limo drivers because of poor directions.
11	c10 percent of this cost was time taken to address customer complaints.
12	dThe limos have 40 percent unused capacity.
13	eThe building has 10 percent unused capacity.
14

Required

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

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b. What value would there be to Paul from preparing the same information in July?

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.