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 $340 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 Activity General office costs Elder Heals $ 136,000 Travel and transportation Equipment lease and maintenance Operating profit The following data have been collected concerning activities at CCS: Jobs4U $ 340,000 Cost Driver Number of clients Number of visits Computer hours Activ Elder Heals. 160 630 240 Total $ 476,000 91,000 58,400 30,500 $ 296,100 Level Jobs4u 100 100 980 Travel and transportation Equipment lease and maintenance Required: 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)
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 $340 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 Activity General office costs Elder Heals $ 136,000 Travel and transportation Equipment lease and maintenance Operating profit The following data have been collected concerning activities at CCS: Jobs4U $ 340,000 Cost Driver Number of clients Number of visits Computer hours Activ Elder Heals. 160 630 240 Total $ 476,000 91,000 58,400 30,500 $ 296,100 Level Jobs4u 100 100 980 Travel and transportation Equipment lease and maintenance Required: 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)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 $340 fee per hour for each
service. The revenues and costs for the year are shown in the following income statement:
Revenue
Expenses:
CATHEDRAL CITY SERVICES
Income Statement
Elder Heals
$ 136,000
Jobs40
$ 340,000
General office costs
Travel and transportation
Equipment lease and maintenance
Operating profit
The following data have been collected concerning activities at CCS:
Cost Driver
Number of clients
Number of visits
Computer hours
Total
$ 476,000
Activity
General office costs
Travel and transportation
Equipment lease and maintenance
Required:
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).
Activity Level
Elder Meals
91,000
58,400
30,500
$296,100
160
630
240
Jobs4U
100
100
980
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Step 1: Introduction
VIEWStep 2: Calculate the activity rate using the cost drivers
VIEWStep 3: Now allocate the total pooled costs to the activity
VIEWStep 4: Prepare the income statement
VIEWStep 5: Allocate the overhead cost using the traditional system
VIEWStep 6: Prepare the income statement under the traditional method
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