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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,
 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

o Non-profit organization
o Regular donations
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
o Possible increase in the donations and projects if new cost accounting system will be
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
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

 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
VIII. Implementation
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