Exercise 9-47 (Static) Activity-Based versus Traditional Costing-Ethical Issues (LO 9-3, 4, 5) Wendy Chen established Windy City Coaching (WCC) to provide teen counseling and executive coaching services to its clients. WCC charges a $300 fee per hour for each service. The revenues and costs for the year are shown in the following income statement. WINDY CITY COACHING Income Statement Teen Counseling Executive Coaching Total Revenue $ 66,000 $ 135,000 $ 201,000 Expenses: Administrative support 40,000 Transportation, etc 36,000 Equipment 20,000 Profit $ 105,000 WCC has kept good records of the following data for cost allocation purposes. Activity Level Activity Cost Driver Teen Counseling Executive Coaching Providing administrative support Number of clients 6 4 Traveling Number of visits 100 150 Using equipment Computer hours 900 700 Required: a. Complete the income statement using activity-based costing and WCC’s three cost drivers. b. Recompute the income statement using direct labor-hours as the only allocation base (220 hours for teen counseling; 450 hours for executive coaching).
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Exercise 9-47 (Static) Activity-Based versus Traditional Costing-Ethical Issues (LO 9-3, 4, 5)
Wendy Chen established Windy City Coaching (WCC) to provide teen counseling and executive coaching services to its clients. WCC charges a $300 fee per hour for each service. The revenues and costs for the year are shown in the following income statement.
| WINDY CITY COACHING | |||||||||
| Income Statement | |||||||||
| Teen Counseling |
Executive Coaching |
Total | |||||||
| Revenue | $ | 66,000 | $ | 135,000 | $ | 201,000 | |||
| Expenses: | |||||||||
| Administrative support | 40,000 | ||||||||
| Transportation, etc | 36,000 | ||||||||
| Equipment | 20,000 | ||||||||
| Profit | $ | 105,000 | |||||||
WCC has kept good records of the following data for cost allocation purposes.
| Activity Level | |||
| Activity | Cost Driver | Teen Counseling |
Executive Coaching |
| Providing administrative support | Number of clients | 6 | 4 |
| Traveling | Number of visits | 100 | 150 |
| Using equipment | Computer hours | 900 | 700 |
Required:
a. Complete the income statement using activity-based costing and WCC’s three cost drivers.
b. Recompute the income statement using direct labor-hours as the only allocation base (220 hours for teen counseling; 450 hours for executive coaching).
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
