Question
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
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 | $ | 147,000 | $ | 213,000 | |||
Expenses: | |||||||||
Administrative support | 44,000 | ||||||||
Transportation, etc | 35,360 | ||||||||
Equipment | 16,800 | ||||||||
Profit | $ | 116,840 | |||||||
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 | 5 |
Traveling | Number of visits | 90 | 170 |
Using equipment | Computer hours | 700 | 700 |
Required:
a. Complete the income statement using activity-based costing and WCCs three cost drivers. (Do not round intermediate calculations.)
b. Recompute the income statement using direct labor-hours as the only allocation base (220 hours for teen counseling; 490 hours for executive coaching). (Do not round intermediate calculations.)
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