Case Material
Red and Jake are both retired cops who served the City of Las Vegas for 35 years. A few
years after retirement, they decided to open a security consulting business just like most retired
cops do.
The firm is named Forest Security Services, LLC (FSSL) and is situated in a 1000 square
foot mixed-used office located in the industrial section of town. The monthly rent is $5000 per
month, and their monthly all-inclusive utility cost is $150 per month. FSSL is licensed by the
state. The annual licensing fee for both city and state costs $500. In addition, their annual
insurance costs $3000.
Red and Jake are well connected in the community and the local governmental agencies.
Recently they are awarded the license to run a halfway home for youths that were remanded for
further rehabilitation after their release and after serving a minor misdemeanor.
FSSL accepted the contract since their office is larger than their need for their security
consulting business. They decided to make tenant improvements costing $10,000 to create a
separation of the two businesses. 200 square feet of space was allocated for the consulting
usiness and the remainder for the halfway home. These improvements allow them to admit 8
youths to the program. The FSSL halfway home program officially admitted the first batch of
enrollees in Fe
uary of this year. The program runs for a one-month term and consistently
has 8 enrollees per month. The state pays FSSL $700 per youth per term. As an outpatient
ehabilitation program, they are required to
ing their meals and snacks for the duration of the
program. Or they can pay an additional $200 per youth per term out of their own pocket for
their meals and snacks for the entire term. During the first quarter, 6 enrollees every month
purchase the meal plan. In the second quarter, 7 enrollees every month purchase the meal plan,
and in the third and fourth quarter, 8 enrollees every month purchase the meal plan.
After the first month of operations, the refrigerator stopped working. The old and dying
efrigerator has a salvage value of $300. This appliance is a necessity because all the meals and
snacks are stored there. Their options: (a) have a meal delivery service every day that costs
$1475 per month. (b) or pick up the pre-packaged meals themselves daily, which costs $35 per
day for the food and $10 per day to cover gas and travel time (c) or purchase an industrial
efrigerator for $12,000, not including installation and delivery of $100. Per FSSL lease,
installing any commercial grade appliance automatically increases their all-inclusive utility
ate to $50 per month.
Other relevant cost information includes allocating all applicable costs based on the
square footage of each cost center. The consulting business will not participate in the cost of
the industrial refrigerator since they have a fully depreciated small dorm-size refrigerator in that
area. Since the intake processing is done through the consulting business, FSSL will charge the
halfway house business a $25 intake processing fee for each enrollee as part of their revenue.
The consulting business earns $1000 per month during the first and second quarters and
$1500 per month during the third and fourth quarters annually. Jake and Red each receive a
$200 per month salary in the consulting business and $500 each on the halfway house
usiness. FSSL adopts a calendar year basis in maintaining their books.
FSSL needs some assistance in decision-making and evaluation. Therefore, they have
contacted YOUR COMPANY NAME HERE, their cost accountant, to provide some advice.
Case Discussion Questions:
(If necessary, the FSSL will use straight-line depreciation. Life of improvements and equipment
is 5 years. For monthly calculations, use 4.33 weeks per month.)
Individual Project: This must be submitted in APA format. Fully cited with reference, one-inch
margin on each side, and double spacing. Include your title and reference page in your
submission.
1. Prepare a Balanced Scorecard for FSSL. Taking into consideration the enrollees from 8 to 10
to 20.
2. Explain the Theory of Constraints. Taking into consideration the enrollees from 8 to 10 to 20.
3. Prepare a Cost-Profit Volume Analysis. Based on 8, 10, and 20 enrollees. Calculate your
eak-even point. Show all your computations and cost components/classifications in a
iving at
your variable costs, fixed costs, and sales price. Your presentation must be in good form.
4. Prepare the following budgets for each year (2021, 2022, and XXXXXXXXXXEnter zero in fields with
no figures.
Sales Budget
Direct Materials
Direct Labor
Overhead Budget
Cash Budget
Expected Cash Budget
Operating Budget
Budgeted Income Statement
Make sure your presentation is professional with all the necessary headings, titles, etc. They
should be clear and easy ready. See the example below.
Forest Security Services, LLC
Overhead Budget
For the Years 2021, 2022, & 2023
XXXXXXXXXX
Expense/Cost Account
Business Licenses $xxxxx $xxxxx $xxxxx
Next Expense/Cost Item $xxxxx $xxxxx $xxxxx
Next Expense/Cost Item $xxxxx $xxxxx $xxxxx
Next Expense/Cost Item $xxxxx $xxxxx $xxxxx
Total $xxxxx $xxxxx $xxxxx
Case Material
$200 per month salary in the consulting business and $500 each on the halfway house business. FSSL adopts a calendar year basis in maintaining their books.