throughout your college career you have been employed on a 267966

Throughout your college career, you have been employed on a part time basis by the Center for Entrepreneurship of your business college. The Center for Entrepreneurship provides executive training and consulting for a fee to individuals and organizations located throughout the state. For 2010, the condensed income statement that follows summarizes the operating results of the center.

Fees …………………………………………..$ 2,625,000

Faculty and staff salaries ……………………. (1,050,000)

Facilities cost ………………………………… (550,000)

Training materials …………………………… (375,000)

Marketing and promotions …………………… (400,000)

Other costs of operations …………………….. (500,000)

Net operating loss ………………………………. $ (250,000)

Given that the center operated at a loss in 2010, the dean of the business college has asked the director to provide a justification for not closing the center. As the dean stated, “We’re charged with a fundamental obligation of being good stewards of the state’s resources. We cannot justify spending net resources to subsidize educational programs to corporations and other profit oriented organizations.” The center director has made the dean’s comments known to all employees and faculty of the center and all are concerned about losing their employment should the center be closed.

Having just completed a chapter in your accounting course addressing joint products, you become curious as to whether the preceding income statement fairly reflects the value of all outputs of the center. Particularly, you believe that the center plays a crucial role in the generation of contributions made to the college by alumni and friends of the Business College and university.

a. Discuss how the existence of joint products of the Center for Entrepreneurship would potentially modify the preceding income statement.

b. Discuss how you could use the concepts of joint products and joint cost allocation to demonstrate to the dean that the Center for Entrepreneurship is not consuming “net resources” of the state or college and that the center should continue its operations.