Question

Allcott Computer Services (ACS) provides computer training and repair services for schools and local businesses. Sales for year 1 totaled $2,700,000. Information regarding resources for the year includes the following:

	Resources Used			Resources Supplied
Marketing	$	221,000		$	235,000
Depreciation		171,000			180,000
Training personnel		90,000			106,000
Energy		159,000			173,000
Short-term labor		410,000			600,000
Long-term labor		840,000			850,000
Administrative		131,000			155,000

   

In addition, ACS spent $86,000 on 530 repair verifications with a cost driver rate of $150.

Required:

Management has requested that you do the following:

a. Prepare a traditional income statement.

b. Prepare an activity-based income statement.

Answer 1

ans:

Note 1 :

Particulars	Resources used (A)	Resources supplied (B)	Unused resources (B-A)
Marketing	221000	235000	14000
Depreciation	171000	180000	9000
Training Personnel	90000	106000	16000
Energy	159000	173000	14000
Short-term Labor	410000	600000	190000
Long-term labor	840000	850000	10000
Administrative	131000	155000	24000
Total	2022000	2299000	277000

a. costs are resources supplied from note 1 :  

Income statement
Sales Revenue		2700000
Marketing	235000
Depreciation	180000
Training Personnel	106000
Energy	173000
Short-term Labor	600000
Long-term labor	850000
Administrative	155000
Repair verification	86000
Total costs		2385000
Operating Profit		315000

b. refer note 1 for numbers in the table

Income statement as per Activity based costing
	Resources used	Unused Resources	Resources supplied
Sales Revenue				2700000
Costs
Unit
Energy	159000	14000	173000
Short term labor	410000	190000	600000
Total	569000	204000	773000
Batch
Repair verification	79500 (530*150)	6500 (86000-79500)	86000
Total	79500	6500	86000
Product/ Customer sustaining
Marketing	221000	14000	235000
training	90000	16000	106000
Total	311000	30000	341000
Capacity sustaining
Administrative	131000	24000	155000
Depreciation	171000	9000	180000
LT labor	840000	10000	850000
TOtal	1142000	43000	1185000
Total costs	2101500	283500	2385000	2385000
Operating Profit				315000