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Harbor City Community Center
Young, David W.
Functional Area(s):
   Management Accounting
Difficulty Level: Beginner
Pages: 4
Teaching Note: Available. 
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Harbor City Health Spa
First Page and the Assignment Questions:
Our deficit is increasing, and we obviously have to reverse that trend if we're going to become solvent. But, for that, we have to know where our costs are, in particular the cost of each of the services we offer.

In March 2003, Liz Conaway, Executive Director of the Harbor City Community Center, expressed concern to Ted Roberts, her new accountant, about the Center’s cost accounting system. The extensive funding Harbor City had received during its early years was decreasing and Ms. Conaway wanted to prepare the Center to be self sufficient, yet she lacked critical cost information.


Harbor City Community Center was established in 1988 by a consortium of community groups. Situated in Torrance, an inner-city residential neighborhood of Los Angeles, California, the Center provided comprehensive services to residents of Torrance and neighboring communities. It continued to maintain strong ties with the community groups responsible for its development and subsequent acceptance in Torrance.

Funding of Harbor City was initially provided by the Federal government as part of an attempt by the Department of Health and Human Services to provide broad based community services to inner-city poverty areas in the United States. When these operating funds were depleted in 2001, the city of Torrance supplemented Harbor City's income with a small three-year grant. Because Ms. Conaway realized that foundation and government support could not continue indefinitely, she intended to make the Center self-sufficient as soon as possible. Harbor City's income statement is contained in Exhibit 1.

The Center was composed of eight client-service departments: Homemaker Service, Family Planning, Counseling, Parents’ Advocacy, Mental Health, Alcohol Rehabilitation, Community Outreach, and Referral and Placement. In addition, the center had a Training and Education Department. The center had 22 paid employees and a volunteer staff of 6-10 students acquiring clinical and managerial experience.

Community Outreach, which had been designed by Harbor City’s consumers, was a multidisciplinary department providing a link between the health and social services at the center and the schools services of the community. The department was staffed by a part-time speech pathologist, a part-time learning specialist, and a full-time nutritionist.

The Referral and Placement Service was for clients whom the center felt, at the time it received a referral, it could not serve; the staff tried to locate another agency that could serve the client. Parents’ Advocacy did not serve clients directly but rather worked on behalf of clients who were having difficulty with housing, schools, and so forth.


Harbor City's previous accountant had established a system to determine the cost per . . .


  1. What is the cost per visit for each department?
  2. How might this information be used by Ms. Conaway?