Data table

Its income statement for

2017

is as follows:

Revenues	$794,640
Salaries of professional staff (8,400 hours $48 per hour)	403,200
Travel	20,000
Administrative and support costs	181,440
Total costs	604,640
Operating income	$190,000

Data table

The percentage of time spent by professional staff on various activities follows:

Making calculations and preparing drawings for clients	74 %
Checking calculations and drawings	5
Correcting errors found in drawings (not billed to clients)	6
Making changes in response to client requests (billed to clients)	7
Correcting own errors regarding building codes (not billed to clients)	8
Total	100 %

Begin by calculating the total labor costs, then calculate the total costs. (If a box is not used in the table, leave the box empty; do not enter a zero. Round your answers to the nearest whole dollar.)
	Value-	Gray	Non-value
	Added	Area	-Added	Total
Making calculations and preparing drawings	$298,368			$298,368
Checking calculations and drawings		$20,160		20,160
Correcting errors found in drawings			$24,192	24,192
Making changes in response to client requests	28,224			28,224
Correcting errors to meet government building code			32,256	32,256
Total professional labor costs	326,592	20,160	56,448	403,200
Part 2
Administrative and support costs	146,966	9,072	25,402	181,440
Travel	20,000			20,000
Total	$493,558	$29,232	$81,850	$604,640

Requirement 3. Suppose
Chanaka
could eliminate all errors so that it did not need to spend any time making corrections and, as a result, could proportionately reduce professional-labor costs. Calculate
Chanaka's
operating income for
2017
(Round your answers to the nearest whole dollar.)
Current operating income			$190,000
	Cost savings in professional labor costs	$56,448
	Cost savings in variable administrative and support costs	25,402
	Add: Total cost savings		81,850
Operating income in 2017 if errors eliminated			$271,850

Requirement 4. Now suppose
Chanaka
could take on as much business as it could complete, but it could not add more professional staff. Assume
Chanaka
could eliminate all errors so that it does not need to spend any time correcting errors. Assume
Chanaka
could use the time saved to increase revenues proportionately. Assume travel costs will remain at
$20,000.00
Calculate
Chanaka's
operating income for
2017
Revenues	$924,000
Professional labor costs	403,200
Travel	20,000
Administrative and support costs	181,440
Total costs	604,640
Operating income	$319,360

ABOVE IS AN EXAMPLE USE THESE NUMBERS

Data table

Its income statement for

2017

is as follows:

Revenues	$705,915
Salaries of professional staff (8,100 hours $53 per hour)	429,300
Travel	18,000
Administrative and support costs	184,599
Total costs	631,899
Operating income	$74,016

Data table

The percentage of time spent by professional staff on various activities follows:

Making calculations and preparing drawings for clients	72 %
Checking calculations and drawings	5
Correcting errors found in drawings (not billed to clients)	8
Making changes in response to client requests (billed to clients)	6
Correcting own errors regarding building codes (not billed to clients)	9
Total	100 %