Chapter $1$ Homework $($i$)$

Served

$2$

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Bates Courier Services provides delivery services in and around Butte City. Its profits have been declining, and management is planning to add an express service that is expected to increase revenue by $$62,500$ per year. The total cost to lease the necessary additional package delivery vehicles from the local dealer is $$10,000$ 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. The income statement assuming no expansion follows.

Required:

a$.$ Prepare a report of the differential costs and revenues if the express service is added.

Note: Enter all revenue and cost amounts as positive numbers; enter any loss amount with a minus sign.

$\backslash$table$[[$Bates Courier Services,$],[$Annual Income Statement before Expansion$],[,$Status Quo: No Express Service,Alternative: With Express Service,Difference$],[$Sales tevenue,$ $192,000,$$ $62,500,$$ $129,500],[$Costs$,,,],[$Vehicle leases,$77,000,,],[$Labor$,61,000,91,500,(30,500)$