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Question: Wendy Chen established Windy City Coaching (WCC)

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:
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:


WCC has kept good records of the following data for cost allocation purposes:


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).
c. How might WCC’s decisions regarding pricing or dropping a service be altered if Wendy were to allocate all overhead costs using direct labor-hours?
d. Under what circumstances would the labor-based allocation and activity-based costing (using Wendy’s three cost drivers) result in similar profit results?
e. A local nonprofit charity is looking for worthy causes to support through financial grants. A primary criterion for support is financial need. Wendy is thinking of applying for support for the teen counseling program. Which allocation method would give her the best chance of winning a grant? Would it be ethical for Wendy to report the income using this method in her application?

WCC has kept good records of the following data for cost allocation purposes:
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:


WCC has kept good records of the following data for cost allocation purposes:


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).
c. How might WCC’s decisions regarding pricing or dropping a service be altered if Wendy were to allocate all overhead costs using direct labor-hours?
d. Under what circumstances would the labor-based allocation and activity-based costing (using Wendy’s three cost drivers) result in similar profit results?
e. A local nonprofit charity is looking for worthy causes to support through financial grants. A primary criterion for support is financial need. Wendy is thinking of applying for support for the teen counseling program. Which allocation method would give her the best chance of winning a grant? Would it be ethical for Wendy to report the income using this method in her application?

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). c. How might WCC’s decisions regarding pricing or dropping a service be altered if Wendy were to allocate all overhead costs using direct labor-hours? d. Under what circumstances would the labor-based allocation and activity-based costing (using Wendy’s three cost drivers) result in similar profit results? e. A local nonprofit charity is looking for worthy causes to support through financial grants. A primary criterion for support is financial need. Wendy is thinking of applying for support for the teen counseling program. Which allocation method would give her the best chance of winning a grant? Would it be ethical for Wendy to report the income using this method in her application?





Transcribed Image Text:

WINDY CITY COACHING Income Statement Teen Executive Counseling Coaching Total Revenue. $6,000 $135,000 $201,000 Expenses: Ådministrative support. Transportation, etc. Equipment. 40,000 36,000 20,000 Profit ... $105,000



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