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a. 10 percent of this cost was for food that was not used by the expiration date, and 12 percent was for food that was incorrectly prepared because of errors in orders taken.
b. 13 percent of this cost was for kitchen staff time spent fixing dishes to replace meals prepared incorrectly because of errors in the original orders taken.
c. 15 percent of this cost was time taken to address customer complaints about incorrect orders.
d. 70 percent of the building was used.

Required:
a. Using the traditional income statement format, prepare a value income statement.
b. What value would there be for managers at Coastal Bistro from preparing the same information in August and the following months?

COASTAL BISTRO
Value Income Statement
For the Month Ending July 31

Answer :

Final answer:

Preparing a value income statement by identifying wastage, re-preparation cost, customer complaint cost, and more, for Coastal Bistro will help to highlight areas of inefficiency and unnecessary expenses. This ongoing approach would be beneficial in making more informed financial decisions, improving cost management, and utilizing resources more efficiently.

Explanation:

The traditional income statement for the Coastal Bistro for the month ending on July 31st would comprise of all costs and revenues incurred. The wastage and mismanagement cost percentages can be taken out of total cost to determine the 'Value Income Statement'. To illustrate, if the total cost is identified as 100%, 10% was spent on wastage, 12% on re-making incorrectly prepared food, and 15% on addressing complaints. This makes for a non-value adding total of 37%.

Preparing this information repeatedly, such as in the month of August and onwards, would add value for the managers by highlighting areas of inefficiency and cutting down on unnecessary expenses. This is especially relevant in case of the use of building, as 70% being utilized suggests there could be space that could be put to better use.

Thus, these value income statements help in making more informed and efficient financial decisions by tracking wasteful expenses and improving the overall cost management within the bistro.

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