9-45. Activity-Based versus Traditional Costing-Ethical IssuesCathedral City Services (CCS) is a not-for-profit organization offering two services in a mid-sized city. The services are "Elder Meals" and "Jobs4U." Elder Meals is a meals-on-wheels type program thatdelivers meals on a scheduled basis to seniors who are house-bound. Jobs4U is a jobs-training program focused on youth or adults who are looking to change careers. Participants in the program are sponsored bya local government agency, a charitable organization, or a local business. CCS charges a $240 fee per hour for each service. The revenues and costs for the year are shown in the following income statement:Revenue.Expenses:..General office costs.RequiredThe following data have been collected concerning activities at CCS:CATHEDRAL CITY SERVICESIncome StatementTravel and transportation.Equipment lease and maintenanceOperating profit......ActivityGeneral office costs....Travel and transportationEquipment lease and maintenance ...Elder Meals Jobs4U$96,000Total$240,000 $336,000Cost DriverNumber of clientsNumber of visitsComputer hours56,00050,40028,000$201,600Activity LevelElder Meals Jobs4U6080100550220900 a. Complete the income statement using activity-based costing and CCS's three cost drivers.b. Recompute the income statement using direct labor-hours as the only allocation base (400 hours for Elder Meals; 1,000 hours for Jobs4U).c. How might CCS's decisions regarding pricing or dropping a service be altered if the organization were to allocate all overhead costs using direct labor-hours?d. Under what circumstances would the labor-based allocation and activity-based costing (using CCS's three cost drivers) result in similar profit results?e. A regional government agency is looking for worthy causes to support through financial grants. A primary criterion for support is financial need. CCS is thinking of applying for support for theElder Meals program. Which allocation method would give CCS the best chance of winning a grant? Would it be ethical for CCS to report the income using this method in their application?

Absorption method of costing - is a method of costing wherein the total costs of the product are…

9-45. Activity-Based versus Traditional Costing-Ethical Issues Cathedral City Services (CCS) is a not-for-profit organization offering two services in a mid-sized city. The services are "Elder Meals" and "Jobs4U." Elder Meals is a meals-on-wheels type program that delivers meals on a scheduled basis to seniors who are house-bound. Jobs4U is a jobs-training program focused on youth or adults who are looking to change careers. Participants in the program are sponsored by a local government agency, a charitable organization, or a local business. CCS charges a $240 fee per hour for each service. The revenues and costs for the year are shown in the following income statement: Revenue. Expenses:. General office costs CATHEDRAL CITY SERVICES Income Statement Travel and transportation.. Equipment lease and maintenance. Operating profit...... The following data have been collected concerning activities at CCS: Activity General office costs... Travel and transportation Equipment lease and maintenance Elder Meals Jobs4U Total $96,000 $240,000 $336,000 Cost Driver Number of clients Number of visits Computer hours 56,000 50,400 28,000 $201,600 Activity Level Elder Meals Jobs4U 60 80 900 100 550 220

9-45. Activity-Based versus Traditional Costing-Ethical Issues Cathedral City Services (CCS) is a not-for-profit organization offering two services in a mid-sized city. The services are "Elder Meals" and "Jobs4U." Elder Meals is a meals-on-wheels type program that delivers meals on a scheduled basis to seniors who are house-bound. Jobs4U is a jobs-training program focused on youth or adults who are looking to change careers. Participants in the program are sponsored by a local government agency, a charitable organization, or a local business. CCS charges a $240 fee per hour for each service. The revenues and costs for the year are shown in the following income statement: Revenue. Expenses:. General office costs CATHEDRAL CITY SERVICES Income Statement Travel and transportation.. Equipment lease and maintenance. Operating profit...... The following data have been collected concerning activities at CCS: Activity General office costs... Travel and transportation Equipment lease and maintenance Elder Meals Jobs4U Total $96,000 $240,000 $336,000 Cost Driver Number of clients Number of visits Computer hours 56,000 50,400 28,000 $201,600 Activity Level Elder Meals Jobs4U 60 80 900 100 550 220

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem information 9-45. Activity-Based versus Traditional Costing—Ethical Issues Cathedral City Services (CCS) is a not-for-profit organization offering two services in a mid-sized city. The services are “Elder Meals” and “Jobs4U.” Elder Meals is a meals-on-wheels type program that delivers meals on a scheduled basis to seniors who are house-bound. Jobs4U is a jobs-training program focused on youth or adults who are looking to change careers. Participants in the program are sponsored by a local government agency, a charitable organization, or a local business. CCS charges a $240 fee per hour for each service. The revenues and costs for the year are shown in the following income statement: The following data have been collected concerning activities at CCS: I need the solutions for questions 1 and 2 Question 1 2) Under what circumstances would the labor-based allocation and activity-based costing (using CCS’s three cost drivers) result in similar profit results? Question 2 2) A…
Mother to Child Connection is a non-profit organizaton that employs abused and battered women staying in shelters. The mission of this orgainzation is to establish productive lifestyles for these women by employing them in the manufacture of affordable clothing for children. All proceeds fund the shelters in which these women live. Additional Information: Materials purchased on account: $15,500 Materials requisitioned and labor used: Job No. Materials Factory Labor 100 $2650 $1770 101 $1240 $650 102 $980 $420 103 $3420 $1900 104 $1000 $500 105 $2100 $1760 For general factory use: $450 $650 Factory overhead costs incurred on account: $2700 Depreciation on machinery: $1750 Factory overhead applied at a rate of 70% of direct labor cost Completed jobs this period: 101, 101, 102, 104 Shipped jobs: 100, 101, 102 and billed customers $8100, $3800, and $3500, respectively. Questions: a. Record journal entries for the transactions…
ABC-A Service ApplicationGrand Haven is a senior living community that offers a full range of services including independent living, assisted living, and skilled nursing care. The assisted living division provides residential space, meals, and medical services (MS) to its residents. The current costing system adds the cost of all of these services (space, meals, and MS) and divides by total resident days to get a cost per resident day for each month. Recognizing that MS tends to vary significantly among the residents, Grand Haven's accountant recommended that an ABC system be designed to calculate more accurately the cost of MS provided to residents. She decided that residents should be classified into four categories (A, B, C, D) based on the level of services received, with group A representing the lowest level of service and D representing the highest level of service. Two cost drivers being considered for measuring MS costs are number of assistance calls and number of assistant…
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having trouble figuring out the Cost of Services? any advice? The Fly Company provides advertising services for clients across the nation. The Fly Company is presently working on four projects, each for a different client. The Fly Company accumulates costs for each account (client) on the basis of both direct costs and allocated indirect costs. The direct costs include the charged time of professional personnel and media purchases (air time and ad space). Overhead is allocated to each project as a percentage of media purchases. The predetermined overhead rate is 65% of media purchases. On August 1, the four advertising projects had the following accumulated costs: August 1 Balances Vault Bank $270,000 Take Off Airlines 80,000 Sleepy Tired Hotels 210,000 Tastee Beverages 115,000 Total $675,000 During August, The Fly Company incurred the following direct labor and media purchase costs related to preparing advertising for each of the four accounts: Direct…
ABC-A Service Application Grand Haven is a senior living community that offers a full range of services including independent living, assisted living, and skilled nursing care. The assisted living division provides residential space, meals, and medical services (MS) to its residents. The current costing system adds the cost of all of these services (space, meals, and MS) and divides it by total resident days to get a cost per resident day for each month. Recognizing that MS tends to vary signifi- cantly among the residents, Grand Haven's accountant recommended that an ABC system be designed to calculate more accurately the cost of MS provided to residents. She decided that residents should be classified into four categories (A, B, C, D) based on the level of services received, with group A representing the lowest level of service and D representing the highest level of service. Two cost driv- ers being considered for measuring MS costs are number of assistance calls and number of…
Burgess Business School has two degree programs, BBA and MBA. The school uses an ABC system to cost the three support services it provides to students from both programs: Career Center, Events, and Library. Following are the costs of these three activities and the cost drivers used in the system: Activity Cost Activity Career Center Event planning and hosting. Library For the most recent year, data collected from the central IT systems indicate the following: MBA 5,600 4,500 30,300 BBA 10,400 5,500 70,700 $ 448,000 440,000 606,000 Cost Driver Interview-hours Event attendance Number of visits Interview-hours Event attendance Library visits Required: a. Compute the cost-driver rates for the three activities at the school. b. Suppose that in a future period, no students from the MBA program visited the Library. What amount of the Library cost would be assigned to the MBA program?
3) Koffler Legal & Consulting Services PLLC., provides legal consulting services to businesses in NYC. They follow a job-costing system with a single direct-cost category (professional labor costs) and a single indirect-cost pool (legal administration costs). Actual professional hours are used as allocation base in order to allocate legal administration costs. Koffler Legal & Consulting Services PLLC., currently has 10 lawyers to perform consulting services. Budgeted and actual amounts for 2019 are as follows: Koffler Legal & Consulting Services PLLC. Budget for 2019 Professional labor costs Legal administration costs Professional labor-hours billed to customers $990,000 $774,000 18,000 hours Actual Results for 2019 Legal administration costs $735,000 Professional labor-hours billed to customers 17,500 Actual professional labor cost rate $59 per hour 1. Consider (a) actual costing, (b) normal costing, and (c) a mixed costing approach, which is a variation from normal costing where…
I need help solving the following problem. Elizabeth Flanigan and Associates is an engineering and design firm that specializes in developing plans for recycling plants for municipalities. The firm uses a job costing system to accumlate the cost associated with each design project. Flanigan employs three levels of employee: senior engineers, associate engineers, and clerical staff. The salary cost of the clerical staff is included in overhead, along with the cost of engineering supplies, automobile travel, and equipment depreciation. The cost of airline travel, motels, building permits, and fees from other consultants is charged to each project as direct materials. Overhead is applied to projects using a predetermined overhead rate based on total engineering hours. The rate for 20X0 is $5 per hour. The six different salary levels for 20X1 for the employees of Elizabeth Flanigan and Associates are listed below. The hourly rate is determined by dividing the yearly salary by 2,000…
Lamothe Solutions is a management consulting firm. Its Business Division advises firms on the adoption and use of financial systems. Civic Division consults with state and local governments. Civic Division has a client that is interested in implementing a new costing system in its public works department. The division's head approached the head of Business Division about using one of its associates. Corporate Division charges clients $810 per hour for associate services, the same rate other consulting companies charge. The Civic Division head complained that it could hire its own associate at an estimated variable cost of $410 per hour, which is what Business pays its associates. Suppose that Civic Division will charge the client interested in implementing a costing system by the hour based on cost plus a fixed fee, where the cost is primarily the consultant's hourly pay. Assume also that Civic Division cannot hire additional consultants. That is, if it is to do this job, it will need…
Lamothe Solutions is a management consulting firm. Its Business Division advises firms on the adoption and use of financial systems. Civic Division consults with state and local governments. Civic Division has a client that is interested in implementing a new costing system in its public works department. The division's head approached the head of Business Division about using one of its associates. Corporate Division charges clients $815 per hour for associate services, the same rate other consulting companies charge. The Civic Division head complained that it could hire its own associate at an estimated variable cost of $415 per hour, which is what Business pays its associates. Required: a. What is the maximum price that Civic Division should pay? b. What is the maximum transfer price that Business Division should obtain for its services, assuming that it is operating at capacity? c-1. Is there any change in maximum price as indicated in part (a), if Business Division had idle…
Bilibid Company operates several regional offices. Its manager, Leila, is very much concermed about the cost of supplies that is why she hired her lover, Mr. Dayan, to analyze the behavior of its cost. A record of service revenues and corresponding supply costs in one of the offices follows: Cost of supplies P66,500 Monthly service revenues P850,000 650,000 750,000 1,450,000 55,500 60,500 96,500 78,500 1.100,000 Required: a. Determine the variable cost per one-peso of sales and the fixed costs using the high-low method. b. Compute the expected cost of supplies during a month when sales would be P1,050,000.