Question

Ralph's Restaurant has the following information for year 2, when several new employees were added to the waitstaff: $100,000 36,000 14,000 20,000 Sales revenue Cost of food serveda Employee wages and salaries Manager salaries Building costs (rent, utilities, etc.)d 19,000 a 5 percent of this cost was for food that was not used by the expiration date and 10 percent was for food that was incorrectly prepared because of errors in orders taken. D 15 percent of this cost was for time spent by cooks to reprepare orders that were incorrectly prepared because of errors in orders taken. C 20 percent of this cost was time taken to address customer complaints about incorrect orders. d 100 percent of the building was used. Required: a. Using the traditional income statement format, prepare a value income statement. (Loss amounts should be indicated with a minus sign.) RALPH'S RESTAURANT Value Income Statement For the Year 2 Ending December 31 Nonvalue-added Value-added Activities Total Activities Sales revenue Cost of merchandise: Cost of food served Gross margin (loss) Operating expenses: Employee salaries and wages Manager salaries Building costs Operating income (loss)

Answer 1

Ans.	RALPH'S   RESTAURANT
	Value Income Statement
	For the Year 2 Ending December 31
		Nonvalue - added	Value - added	Total
		Activities	Activities
	Sales revenue	$0	$100,000	$100,000
	Cost of merchandise:
	Cost of food served	$5,400	$30,600	$36,000
	Gross margin (loss)	-$5,400	$69,400	$64,000
	Operating expenses:
	Employee salaries and wages	$2,100	$11,900	$14,000
	Manager salaries	$4,000	$16,000	$20,000
	Building costs		$19,000	$19,000
	Operating income (loss)	-$11,500	$22,500	$11,000
	*Working Notes:
	Non value added activities for Cost of food served :
	Percent of not used	5%
	Percent of incorrectly prepared	10%
	Total non value added percentage	15%
		Nonvalue - added	Value - added
		Activities	Activities
	Cost of food served	$36,000 * 15% = $5,400	$36,000 - $5,400 = $30,600
	Employee salaries and wages	$14,000 * 15% = $2,100	$14,000 - $2,100 = $11,900
	Manager salaries	$20,000 * 20% = $4,000	$20,000 - $4,000 = $16,000
	*100% of building is used it means there is no any percentage of non value added activity.
	*Gross margin   = Sales revenue - Cost of food served
	*Operating income = Gross margin - Operating expenses