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