$18-60$ Value Streams and Profit Centers Levine Company is a manufacturer of very inexpensive cell

phones and television sets. The company uses recycled parts and a highly structured manufacturing

process to keep costs low so that it can sell at very low prices. The company uses lean accounting

procedures to help keep costs low and to examine financial performance. Levine uses value streams

to study the profitability of its two main product groups, cell phones and TVs$.$ Information about

finished goods inventory, sales, production, and average sales price follows:

Levine's costs for the current quarter are as follows. Note that some of the company's manu$-$

facturing and selling costs are traceable directly to the two value streams, while other costs are not

traceable. Levine considers all traceable fixed costs to be controllable by the manager of each group.

Also, Levine's value stream shows operating income determined by the full costing method; the dif$-$

ference from the traditional full costing income statement is that the effect on income from a change

in inventory is shown as a separate item on the value$-$stream income statement:

Manufacturing

Selling and administrative

Nontraceable fixed costs

Manufacturing

Selling and administrative

Required Consider Levine's two value streams as profit centers, and use the contribution income state$-$

ment as a guide to develop a value$-$stream income statement for the company. $($See Exhibit $18\mathrm{.}9$ for an

example of a contribution income statement.$)$ In your solution, replace the term controllable margin $($in

Exhibit $18\mathrm{.}9)$ with value$-$stream profit. Be sure to include the inventory effect on profit as a separate line

item in your value$-$stream income statement.

What is the effect of the inventory change $($and in what direction$)$ on the value stream profit of cell

phones?

What is the value stream profit of TVs$?$

Interpret the information revealed by the value stream income statements.

What is the benefit of the use of value streams for evaluating profit centers relative to the use of the

contribution income statement for individual product lines?