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Travon's Limo Service provides transportation services in and around Bentonville. Its profits have been declining, and management is planning to add a package delivery service that is expected to increase revenue by $275,000 per year. The total cost to lease additional delivery vehicles from the local dealer is $60,000 per year. The present manager will continue to supervise all services. However, labor and utilities costs will increase by 40% and rent and other costs will increase by 15% when the package delivery service is added. Sales Revenue $960,000 Costs: Vehicle leases $400,000 Labor 290,000 Utilities 50,000 Rent 100,000 Other costs 60,000 Manager's Salary 120,000 Total Costs 1,020,000 Operating Loss $ (60,000) Required: Prepare a report of the differential costs and revenues if the delivery service is added.

Travon's Limo Service provides transportation services in and around Bentonville. Its profits have been declining, and management is planning to add a package delivery service that is expected to increase revenue by $275,000 per year. The total cost to lease additional delivery vehicles from the local dealer is $60,000 per year. The present manager will continue to supervise all services. However, labor and utilities costs will increase by 40% and rent and other costs will increase by 15% when the package delivery service is added. Sales Revenue $960,000 Costs: Vehicle leases $400,000 Labor 290,000 Utilities 50,000 Rent 100,000 Other costs 60,000 Manager's Salary 120,000 Total Costs 1,020,000 Operating Loss $ (60,000) Required: Prepare a report of the differential costs and revenues if the delivery service is added.

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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Travon's Limo Service provides transportation services in and around Bentonville. Its profits have been declining, and management is planning to add a package delivery service that is expected to increase revenue by $275,000 per year. The total cost to lease additional delivery vehicles from the local dealer is $60,000 per year. The present manager will continue to supervise all services. However, labor and utilities costs will increase by 40% and rent and other costs will increase by 15% when the package delivery service is added. Sales Revenue $960,000 Costs: Vehicle leases $400,000 Labor 290,000 Utilities 50,000 Rent 100,000 Other costs 60,000 Manager's Salary 120,000 Total Costs 1,020,000 Operating Loss $ (60,000) Required: Prepare a report of the differential costs and revenues if the delivery service is added.
Transcribed Image Text:Travon's Limo Service provides transportation services in and around Bentonville. Its profits have been declining, and management is planning to add a package delivery service that is expected to increase revenue by $275,000 per year. The total cost to lease additional delivery vehicles from the local dealer is $60,000 per year. The present manager will continue to supervise all services. However, labor and utilities costs will increase by 40% and rent and other costs will increase by 15% when the package delivery service is added. Sales Revenue $960,000 Costs: Vehicle leases $400,000 Labor 290,000 Utilities 50,000 Rent 100,000 Other costs 60,000 Manager's Salary 120,000 Total Costs 1,020,000 Operating Loss $ (60,000) Required: Prepare a report of the differential costs and revenues if the delivery service is added.
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