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 $275 and $340 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 Labor Equipment-related costs Occupancy costs $ 17,100 129,000 45,100 11,650 $ 15,100 99,500 64,000 13,200 In addition to the traceable operating costs, the company had manufacturing costs of $146.750 million, and selling and administrative costs of $35 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 $4.0 million for the office chair stream and $22.5 million for the office table stream. Required: Prepare, in good form (.e., using Exhibit 17.17 as a guide), the value-stream income statement for Marshall Company. (Enter your answers in thousands of dollars.)

Answer 1

	MARSHALL COMPANY
	Value Stream Income Statement (000s)
	Office Chairs		Office Tables		Totals
Sales		$275,000		$340,000	$615,000
Operating costs:
Materials	$17,100		$15,100
Labor	129,000		99,500
Equipment related cost	45,100		64,000
Occupancy cost	11,650		13,200
Total operating cost		202,850		191,800	394,650
Value stream profit before inventory change		72,150		148,200	220,350
Less: value of reduction in inventory		-4,000		-22,500	-26,500
Value stream profit		68,150		125,700	193,850
Less: Non traceable costs:
Manufacturing cost					-146,750
Selling and administrative cost					-35,000
Total non traceable fixed cost					-181,750
Operating income					$12,100