Kevin's Transportation provides services in Greater Cincinnati. Management is concerned because the company's profits have been declining, so they are planning to add a delivery service that is expected to increase revenue by $285,000 per year. The total cost to lease additional vehicles from a local dealer is $75,000 per year. The current manager will continue to supervise all daily operations. Labor and utilities costs will increase by 40% and rent and other costs will increase by 15% when the new service is added. Kevin's Transportation Annual Income Statement Before New Service Sales Revenue Costs: Vehicle Leases Labor Utilities Rent Other Costs Manager's Salary Total Costs Operating Profit (Loss) $ 400,000 290,000 50,000 100,000 60,000 120,000 $ 960,000 1,020,000 $ (60,000) a. Prepare a report of the differential costs and revenues if the delivery service is added. b. Should management start up the delivery service? Explain your answer..

Kevin's Transportation provides services in Greater Cincinnati. Management is concerned because the company's profits have been declining, so they are planning to add a delivery service that is expected to increase revenue by $285,000 per year. The total cost to lease additional vehicles from a local dealer is $75,000 per year. The current manager will continue to supervise all daily operations. Labor and utilities costs will increase by 40% and rent and other costs will increase by 15% when the new service is added. Kevin's Transportation Annual Income Statement Before New Service Sales Revenue Costs: Vehicle Leases Labor Utilities Rent Other Costs Manager's Salary Total Costs Operating Profit (Loss) $ 400,000 290,000 50,000 100,000 60,000 120,000 $ 960,000 1,020,000 $ (60,000) a. Prepare a report of the differential costs and revenues if the delivery service is added. b. Should management start up the delivery service? Explain your answer..

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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Use the below tables to solve the problem.
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