Question

A voluntary health and welfare entity sends a mailing to all of its members including those who have donated in the past and others who have never donated. The mailing, which had a total cost of $22,000, asks for monetary contributions to help achieve the charity’s stated mission. In addition, 80 percent of the material included in the mailing is educational in nature, providing data about the entity’s goals. Which of the following is true?

A. Some part of the $22,000 should be reported as a program service cost because more than 50 percent of the material was educational in nature.
B. Some part of the $22,000 should be reported as a program service cost because of the educational materials included.
C. No part of the $22,000 should be reported as a program service cost because there is no specific call to action.
D. No part of the $22,000 should be reported as a program service cost because the mailing was sent to both previous donors and individuals who have not made donations.

Answer 1

Answer:

The correct answer to the following question is option C.

Explanation:

Service cost can be defined as a expense which a company incurred when they hire another person or independent contractors to perform valuable or necessary task, for which a specialized knowledge might be needed. As per this question a health and welfare entity is sending mail to all of its members regarding the donations, and in this process it cost them $22,000 but here no part of this cost would be reported as program service cost because no specific call for action has been made.