Question

Campus Package Delivery (CPD) provides delivery services in and around Paradise. Its profits have been declining, and management is planning to add an express service that is expected to increase revenue by $50,000 per year. The total cost to lease the necessary additional package delivery vehicles from the local dealer is $7,500 per year. The present manager will continue to supervise all services at no increase in salary. Due to expansion, however, the labor costs and utilities would increase by 50 percent. Rent and other costs will increase by 20 percent. Required: a. Prepare a report of the differential costs and revenues if the express service is added. (Enter loss amount with minus sign.)

	Campus Package Delivery Income Statement Status Quo: Alternative: No Express Service With Express Service Difference Sales revenue $152,000 Costs Vehicle leases 60,000 Labor 48,000 Utilities 8,000 Rent 16,000 Other costs 8,000 Manager's Salary 24,000 Total costs $164,000 Operating profit (loss) $(12,000)

Answer 1

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