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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