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 herapplication?

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WINDY CITY COACHING Income Statement Teen Counseling $66,000 Executive Coaching Total $135,000 $201,000 Hevenue -- --.-- -. Expenses Administrative support..- Transportation, etc. Equipment.. 40,000 36,000 20,000 $105,000 Profit Activity Level Teen Executive Activity Cost Driver Counseling Coaching Providing administrative support Traveling . - Using equipment _ _ _ . . . - ...- . . Number of clients Number of visits Computer hours 6 100 900 4 150 700