Business Case 17-3
Shelter Partnership, Inc.
Ruth Schwartz established Shelter Business Partnership in 1985 as a non-profit corporation providing services for the homeless people. Another entity of the Partnership, Shelter Resource Bank is the one handling donations that were made in kind from different manufacturers, retailers, and other businesses. These donations came from either new or excess inventories of the different companies and were stored at the Resource Bank’s warehouse. All donations are distributed to the homeless shelters and social service agencies free of charge. A look at the Partnership’s Statement of Revenue and Expenses would show that revenues come from both private foundations and public grants. The partnership also earns a small amount from interest income. Both revenues and expenses are not allocated into different entities of the Partnership. Expenses are categorized into three : personnel expenses, other expenses and independent contractor expenses. Under personnel expenses, salaries, staff benefits and payroll tax expenses were included. Cost of items used in running the organization, such as the cost of occupancy, telephone, printing, and insurance are all accounted for under other expenses. The independent contractor expenses were all the expenses incurred for temporary employees and the bills from the trucking company that picks up donated goods from different companies to Resource Bank. The Problem: Ruth used a single stage cost accounting system. She now wants to identify the actual cost for some of the cost directly incurred one of their operating entity, Shelter Resource Bank. Ruth wants to account for the rental cost of the warehouse where Shelter Resource Bank is operating. Also, insurance cost was not properly allocated to the Resource Bank as it should be since concerns on safety were more abundant in the warehouse. Recommendation: Since Shelter Resources Bank has its own operations, cost directly incurred by...
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