Travon's Limo Service Provides Transportation Services in and Around Bentonville $\quad$

Travon's Limo Service provides transportation services in and around Bentonville.Its profits have been declining,and management is planning to add a package delivery service that is expected to increase revenue by $275,000 per year.The total cost to lease additional delivery vehicles from the local dealer is $60,000 per year.The present manager will continue to supervise all services.However,labor and utilities costs will increase by 40% and rent and other costs will increase by 15% when the package delivery service is added. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Tranor's Limo Senrice}$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Annual Income Statement}$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text {Before Erpansion}$
$\begin{array}{|l|r|r|}\hline \text { Sales Revenue } & & \$ 960,000 \\\hline \text { Costs: } & & \\\hline \text { Vehicle leases } & \$ 400,000 & \\\hline \text { Labor } & 290,000 & \\\hline \text { Utilities } & 50,000 & \\\hline \text { Rent } & 100,000 & \\\hline \text { Other Costs } & 60,000 & \\\hline \text { Manager's Salary } & 120,000 & \\\hline \text { Total Costs } & & 1,020,000 \\\hline \text { Operating Protit (Loss) } & & (\$ 60,000) \\\hline\end{array}$
a.Prepare a report of the differential costs and revenues if the delivery service is added.
b.Should management start up the delivery service? Explain your answer.