Question

Marshall Company is a large manufacturer of office furniture. The company has recently adopted lean accounting and has identified two value streams—office chairs and office tables. Total sales in the most recent period for the two streams are $310 and $375 million, respectively.

In the most recent accounting period, Marshall had the following operating costs, which were traced to the two value streams as follows (in thousands):

Chairs Tables
Operating costs:
Materials $ 17,800 $ 15,800
Labor 136,000 103,000
Equipment-related costs 45,800 65,400
Occupancy costs 12,000 13,900

In addition to the traceable operating costs, the company had manufacturing costs of $181.750 million, and selling and administrative costs of $50 million that could not be traced to either value stream. Due to the implementation of lean methods, the firm has been able to reduce inventory in both value streams significantly. Marshall has calculated the fixed cost of prior period inventory that is included in the current income statement to be $7.5 million for the office chair stream and $21.5 million for the office table stream.

Required:

Prepare, in good form (i.e., using Exhibit 17.17 as a guide), the value-stream income statement for Marshall Company. (Enter your answers in thousands of dollars.)

MARSHALL COMPANY Value-Stream Income Statement (000s) Office Chairs Office Tables Total Sales Operating costs: Total operatin

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Answer #1

Prepare the value-stream income statement for Marshall Company:

Marshall Company
Value-Strem Income Statement (000s)
Office Chairs Office Tables Total
Sales $310,000 $375,000 $685,000
Operating cost:
Materials $17,800 $15,800
Labor $136,000 $103,000
Equipment related cost $45,800 $65,400
Occupancy cost $12,000 $13,900
Total operating cost $211,600 $198,100 $409,700
Value stream profit before inventory change $98,400 $176,900 $275,300
Less: Value of reduction in inventory ($7,500) ($21,500) ($29,000)
Value stream profit $90,900 $155,400 $246,300
Less: Non traceable costs:
Manufacturing cost ($181,750)
Selling and administrative cost ($50,000)
Total non traceable fixed cost ($231,750)
Operating income $14,550
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