Question

Youth Athletic Services (YAS) provides adult supervision for organized youth athletics. It has a president, William Mayes, and five employees. He and one of the other five employees manage all marketing and administrative duties. The remaining four employees work directly on operations. YAS has four service departments: managing, officiating, training, and dispute resolution. A time card is marked and records are kept to monitor the time each employee spends working in each department. When business is slow, there is idle time, which is marked on the time card. (It is necessary to have some idle time because some direct labor-hours must be available to accommodate fluctuating peak demand periods throughout the day and the week.) Some of the July operating data are as follows. Idle Time Managing Officiating Training $6,950 $7,900 $3,eee 25 320 125 Dispute Resolution $ 1,800 80 90 Sales revenue Direct labor (in hours) Direct overhead traceable to departments Equipment Supplies Transportation $ 10 $ 950 202 375 $ 875 3 80 1,000 $ 700 252 150 200 50 Other Data . The four employees working in the operating departments all make $15 per hour. . The fifth employee, who helps manage marketing and administrative duties, earns $2,250 per month, and William earns $3,000 per month. • Indirect overhead amounted to $768 and is assigned to departments based on the number of direct labor-hours used. Because there are idle hours, some overhead will not be assigned to a department. . In addition to salaries paid, marketing costs for items such as advertising and special promotions totaled $600. . In addition to salaries paid, other administrative costs were $225. • All revenue transactions are cash; all others are on account. - No inventories are kept.

Answer 1

Answer -

Youth Athletic Services
Income Statement
For Month Ending July 31
	Managing	Officiating	Training	Dispute Resolution	Total
Revenue	$6950	$7900	$3000	$1000	$18850
Cost of services:
Labor	$4800	$1200	$1875	$1350
Direct overhead	$1525	$2175	$1100	$260
Indirect overhead	$384	$96	$150	$108
Total costs of services	$6709	$3471	$3125	$1718	$15023
Department margin	$241	$4429	($125)	($718)	$3827
Less: Other costs
Unassigned labor costs					$5250
Unassigned overhead indirect costs					$30
Marketing and administrative costs					$825
Operating profit (loss)					($2278)

Calculation:

1. Direct labor:

Managing:

= Direct labor hours * $15 per hour

= 320 hours * $15 per hour

= $4800

Officiating:

= Direct labor hours * $15 per hour

= 80 hours * $15 per hour

= $1200

Training:

= Direct labor hours * $15 per hour

= 125 hours * $15 per hour

= $1875

Dispute resolution:

= Direct labor hours * $15 per hour

= 90 hours * $15 per hour

= $1350

2. Direct overhead:

Managing:

= Equipment + Supplies + Transportation

= $950 + $200 + $375

= $1525

Officiating:

= Equipment + Supplies + Transportation

= $875 + $300 + $1000

= $2175

Training:

= Equipment + Supplies + Transportation

= $700 + $250 + $150

= $1100

Dispute resolution:

= Equipment + Supplies + Transportation

= $10 + $200 + $50

= $260

3. Indirect overhead:

Total direct labor hours = Idle time + Managing (direct labor hours) + Officiating (direct labor hours) + Training (direct labor hours) + Dispute resolution (direct labor hours)

= 25 hours + 320 hours + 80 hours + 120 hours

= 640 hours

Managing:

= [Indirect overhead / Total direct labor hour] * Managing (direct labor hours)

= [$768 / 640 direct labor hours] * 320 direct labor hours

= $384

Officiating:

= [Indirect overhead / Total direct labor hour] * Officiating (direct labor hours)

= [$768 / 640 direct labor hours] * 80 direct labor hours

= $96

Training:

= [Indirect overhead / Total direct labor hour] * Training (direct labor hours)

= [$768 / 640 direct labor hours] * 125 direct labor hours

= $150

Dispute resolution:

= [Indirect overhead / Total direct labor hour] * Dispute resolution (direct labor hours)

= [$768 / 640 direct labor hours] * 90 direct labor hours

= $108

Unassigned overhead indirect costs (Idle time):

= [Indirect overhead / Total direct labor hour] * Idle time

= [$768 / 640 direct labor hours] * 25 direct labor hours

= $30

4. Total costs of services:

Managing:

= Labor + Direct overhead + Indirect labor

= $4800 + $1525 + $384

= $6709

Officiating:

= Labor + Direct overhead + Indirect labor

= $1200 + $2175 + $96

= $3471

Training:

= Labor + Direct overhead + Indirect labor

= $1875 + $1100 + $150

= $3125

Dispute resolution:

= Labor + Direct overhead + Indirect labor

= $1350 + $260 + $108

= $1718

Total costs of services (All departments):

= Total costs of services (Managing) + Total costs of services (Officiating) + Total costs of services (Training) + Total costs of services (Dispute resolution)

= $6709 + $3471 + $3125 + $1718

= $15023

5. Department margin:

Managing:

= Revenue - Total costs of services

= $6950 - $6709

= $241

Officiating:

= Revenue - Total costs of services

= $7900 - $3471

= $4429

Training:

= Revenue - Total costs of services

= $3000 - $3125

= ($125)

Dispute resolution:

= Revenue - Total costs of services

= $1000 - $1718

= ($718)

Department margin (All departments):

= Total revenue - Total costs of services (All departments)

= $18850 - $15023

= $3827

6. Unassigned labor cost:

= Salary to fifth employee + Salary to William

= $2250 + $3000

= $5250

7. Marketing and administrative costs:

= Marketing costs + Administrative costs

= $600 + $225

= $825

8. Operating profit (loss):

= Department margin (All departments) - [Unassigned labor costs + Unassigned overhead indirect costs + Marketing and administrative costs]

= $3827 - [$5250 + $30 + $825]

= ($2278)