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I.

Background
II. Problem
 What possible improvements could be done to improve Shelter Partnership, Inc.’s cost
accounting system?
III. Objectives
 Enumerate problems in the current cost accounting system of Shelter Partnership, Inc.
 Analyze and suggest action plans to improve the cost accounting system of Shelter Partnership,
Inc.
 Propose a pro forma statement of functional expenses and statement of activities
 Identify direct and indirect expenses per cost object
IV. Point of View
 Ruth Schwartz
V. Areas of Consideration
1. Shelter Partnership. Inc. is a non-profit organization
2. The basis for cost allocation are unclear
3. Possible underestimation of the costing for Shelter Resource Bank
4. Accounting for the salaries of personnel

A. Framework

B. SWOT
Strengths:
o Non-profit organization
o Regular donations
Weakness
o Poor cost accounting system
 Inaccurate cost allocation
 Expenses are not properly identified per cost object
o No basis for accounting the salaries of personnel
Opportunities
o Possible increase in the donations and projects if new cost accounting system will be
implemented
o Improvement of services and programs of each cost object since there’s an increase in
the amount of funds
o Proper transparency and accountability can be reflection upon the implementation of
the new cost accounting system
Threats
o Possible decrease in the donations if cost accounting system will not be improved
o Quality of projects may be jeopardized due to the decrease of donors
o Reputation as a non-profit organization tarnished if transparency is not reflected in the
company’s cost accounting system

VI. ACAs
 Establish the cost objects and use direct labor hours as the allocation base.
o Shelter Resource Bank (Direct Material Assistance)
o Technical Assistance – fund raising and allocation
o Public Policy Support
o Program Development
 Use multiple stage cost allocation system rather single stage cost allocation. Identify direct and
indirect costs. For the personnel expense, use direct labor hours as the allocation base
o Include depreciation for the warehouse. First, get the current market price of the
warehouse to determine the depreciation expense
o Insure goods
 Allocate costs on the basis its programs and donations
VII. Recommendation
1&2
VIII. Implementation
Pro-forma
Direct and indirect
Program Centers
 Shelter Resource Bank (Direct Material Assistance)
 Technical Assistance – fund raising and allocation
 Public Policy Support
 Program Development
Support Centers
 General and administrative
 Fundraising