Environmental Business Consultants, LLC (EBC) has a contract with Terrabean Coffee, a

large retail coffee company with 5,000 shops across North America, to manage the company’s

waste disposal and recycling services. Under the contract with Terrabean, EBC is

responsible for negotiating, monitoring, and servicing contracts with dozens of garbage

and recycling collection companies in major cities throughout the United States and Canada.

These contracts generally require the garbage and recycling collection companies to

collect both garbage and recyclables on a daily basis from between 10 and 30 shops, 365

days per year. When collection is missed, invoices are questioned, service is changed,

new shops are opened, or other issues arise, the shop managers call EBC for assistance.

EBC maintains a call center to receive these calls and coordinate the appropriate

response. The call center employees record each call and refer the issue to the EBC manager

responsible for that location for follow-up. Locations are assigned to one of five

geographic regions: Northeast (includes major metropolitan areas in eastern Canada),

Southeast, Midwest, Southwest, and Northwest (includes major metropolitan areas in

western Canada). EBC uses process costing with a weighted average cost flow assumption

to assign the call center cost to each geographic region on a per-call unit cost. Overhead

is applied per labor hour worked. Thus, the percentage complete can be applied to

both labor and overhead. Because some questions or complaints take more than a day or

two to resolve, there are typically some “unfinished” calls at the end of each period.

For the fiscal year ended September 30, 2019, the EBC call center reported the following

information regarding calls handled:

Required
1. Determine the equivalent number of calls completed during fiscal year 2019.
2. Determine the per-unit cost of each call.
3. Determine the cost of the calls completed.
4. Determine the cost of ending work-in-process inventory at September 30, 2019.

Transcribed Image Text:

Work-in-process, October 1, 2018... Work done during fiscal year 2019: Direct labor incurred... Overhead applied.... Total costs incurred during fiscal year 2019. Calls in process at October 1, 2018 (30% complete). Calls started and finished during fiscal year 2019. Calls in process at September 30, 2019 (40% complete) $350 $262,480 247,947 $510,427 50 calls 35,200 calls 40 calls