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Holborn Appliance Shop is a small business located on the coast. It specializes in appliance repair and is known in the area f reliable, and friendly service. Katie Holborn, the owner and primary repair specialist, has been working with appliances since earned about them helping her father in his shop. After teaching a class on appliance repair at the local technical college, Ka she might be able to develop a training business to complement the shop's repair work. Katie has put together some estimat mpact of a training program on revenues and costs. She estimates that revenues would grow by about 30 percent. Parts cos for demonstration machines) would increase by about 10 percent and labor costs by about 50 percent. The rent, which is bas revenue, would also increase by about 30 percent. Utilities would increase by about 30 percent and insurance costs by 18 pe Other costs would increase by 20 percent. Using her spreadsheet skills, Katie puts together the following estimated annual i statement assuming she offers both repair and training services.

Holborn Appliance Shop is a small business located on the coast. It specializes in appliance repair and is known in the area f reliable, and friendly service. Katie Holborn, the owner and primary repair specialist, has been working with appliances since earned about them helping her father in his shop. After teaching a class on appliance repair at the local technical college, Ka she might be able to develop a training business to complement the shop's repair work. Katie has put together some estimat mpact of a training program on revenues and costs. She estimates that revenues would grow by about 30 percent. Parts cos for demonstration machines) would increase by about 10 percent and labor costs by about 50 percent. The rent, which is bas revenue, would also increase by about 30 percent. Utilities would increase by about 30 percent and insurance costs by 18 pe Other costs would increase by 20 percent. Using her spreadsheet skills, Katie puts together the following estimated annual i statement assuming she offers both repair and training services.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 1-48 (Static) Cost Data for Managerial Purposes (LO 1-3) Holborn Appliance Shop is a small business located on the coast. It specializes in appliance repair and is known in the area for fast, reliable, and friendly service. Katie Holborn, the owner and primary repair specialist, has been working with appliances since she learned about them helping her father in his shop. After teaching a class on appliance repair at the local technical college, Katie thinks she might be able to develop a training business to complement the shop's repair work. Katie has put together some estimates on the impact of a training program on revenues and costs. She estimates that revenues would grow by about 30 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 on revenue, would also increase by about 30 percent. Utilities would increase by about 30 percent and insurance costs by 18 percent. Other costs would increase by 20 percent. Using her spreadsheet skills, Katie puts together the following estimated annual income statement assuming she offers both repair and training services. Required: a-1. Prepare an income statement for repair service only. a-2. Based on the financial impact, should Katie add training to her current repair business? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Prepare an income statement for repair service only. Holborn Appliance Shop Annual Income Statement Repair and Training Service $ 474,500 Sales revenue Costs Parts Labor Rent Utilities Insurance Other costs Total costs Operating profit (loss) $ $ 110,000 180,000 52,000 39,000 4,130 Repair Service Only 21,600 406,730 $ 67,770 < Req A1 0 Req A2 >
Transcribed Image Text:Problem 1-48 (Static) Cost Data for Managerial Purposes (LO 1-3) Holborn Appliance Shop is a small business located on the coast. It specializes in appliance repair and is known in the area for fast, reliable, and friendly service. Katie Holborn, the owner and primary repair specialist, has been working with appliances since she learned about them helping her father in his shop. After teaching a class on appliance repair at the local technical college, Katie thinks she might be able to develop a training business to complement the shop's repair work. Katie has put together some estimates on the impact of a training program on revenues and costs. She estimates that revenues would grow by about 30 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 on revenue, would also increase by about 30 percent. Utilities would increase by about 30 percent and insurance costs by 18 percent. Other costs would increase by 20 percent. Using her spreadsheet skills, Katie puts together the following estimated annual income statement assuming she offers both repair and training services. Required: a-1. Prepare an income statement for repair service only. a-2. Based on the financial impact, should Katie add training to her current repair business? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Prepare an income statement for repair service only. Holborn Appliance Shop Annual Income Statement Repair and Training Service $ 474,500 Sales revenue Costs Parts Labor Rent Utilities Insurance Other costs Total costs Operating profit (loss) $ $ 110,000 180,000 52,000 39,000 4,130 Repair Service Only 21,600 406,730 $ 67,770 < Req A1 0 Req A2 >
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