Manhattan Consultants and Centennial Shipping (CS)
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Problem 1
During January, Manhattan Consultants worked 1,000 hours for Nocando Manufacturing, 300 hours for Sails, Inc., and 500 hours for Original John's Restaurants, Manhattan Consultants bills clients at $80 an hour; its labor costs are $30 an hours. A total of 2,000 hours were worked in January with 200 hours not billable to clients. Overhead costs of $30,000 were incurred and assigned to clients on the basis of direct-labor hours. Because 200 hours were not billable, some overhead was not assigned to jobs. Manhattan Consultants had $25,000 in marketing and administrative costs. All transactions were on account.
a. What are the revenue and cost per client?
b. Prepare an income statement for January.
Problem 2
Centennial Shipping (CS) wishes to trace its distribution costs to each of its four customer types, A, B, C, and D, CS delivers some shipments itself and outsources the delivery of others. Use the following information to estimate distribution costs per customer:
CS Customer Profitability Total A B C D____
Shipments per year....................121,400 40,000 16,000 57,000 7,800
Delivered by CS....................... 80% 90% 25% 80%
Outsourced delivery................ 20% 10% 75% 20%
CS distribution costs.................$6,700,000
Outsourced shipment costs........... 120,000
Total distribution costs...............$6,820,000
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Solution Summary
This solution is comprised of a detailed explanation to answer what are the revenue and cost per client and prepare an income statement for January for Manhattan Consultants and find the distribution costs per customer for Centennial Shipping (CS).
Solution Preview
a. What are the revenue and cost per client?
1,000 hours for Nocando Manufacturing
Revenue 1,000 hours x $80 per hour $80,000
Labor costs 1,000 hours x $30 per hour 30,000
Overhead costs 1,000 hours x $15 per hour 15,000
Total cost 45,000
($30,000/2,000 hours = $15 per hour)
300 hours for Sails, Inc.
Revenue 300 hours x $80 per hour $24,000
Labor costs 300 hours x $30 per hour 9,000
Overhead costs 300 hours x $15 per hour 4,500
Total cost 13,500
500 hours for Original John's Restaurants
Revenue 500 hours x $80 per hour $40,000
Labor costs 500 hours x $30 per hour 15,000
Overhead costs 500 hours x $15 per hour 7,500
Total cost 22,500
b. Prepare an income statement for January. ...
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