Question

Elite Lawn & Plowing (EL&P) is a lawn and snow plowing service with both residential and...

Elite Lawn & Plowing (EL&P) is a lawn and snow plowing service with both residential and commercial clients. The owner believes that the commercial sector has more growth opportunities and is considering dropping the residential service.

Twenty employees worked a total of 41,000 hours last year, 28,000 on residential jobs and 13,000 on commercial jobs. Wages were $14 per hour for all work done. Any materials used are included in overhead as supplies. All overhead is allocated on the basis of labor-hours worked, which is also the basis for customer charges. Because of increased competition for commercial accounts, EL&P can charge $36 per hour for residential work, but only $26 per hour for commercial work.

Required:

a. If overhead for the year was $120,860, what were the profits of the residential and the commercial services using labor-hours as the allocation base? (Do not round intermediate calculations.)

b. Overhead consists of costs of traveling to the site, using equipment (including vehicle rental), and using supplies, which can be traced as follows:

Cost Driver Volume

Activity Cost Driver Cost Commercial Residential
Traveling Number of clients served $ 15,960 17 40
Using equipment Equipment hours 38,400 3,900 2,100
Using supplies Area serviced in square yards 66,500 110,000 80,000
Total overhead $ 120,860

Recalculate profits for commercial and residential services based on these activity bases. (Do not round intermediate calculations.)

Homework Answers

Answer #1

Overhead allocation based on ABC

Activity

Cost driver

Cost

Cost allocation

Residential

Commercial

Traveling

Number of client served

15960

11200

15960*(40/57)

4760

15960*(17/57)

Using equipment

Equipment hour

38400

13440

38400*(2100/6000)

24960

38400*(3900/6000)

Using supplies

Area serviced in square yards

66500

28000

66500*(80000/190000)

38500

66500*(110000/190000)

52640

68220

Residential

Commercial

Revenue

28000 hour*36

1008000

13000 hour*26

338000

Less: variable cost

Direct labor

28000hour*14

392000

182000

Overhead

52640

68220

Profit

563360

87780

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Elite Lawn & Plowing (EL&P) is a lawn and snow plowing service with both residential and...
Elite Lawn & Plowing (EL&P) is a lawn and snow plowing service with both residential and commercial clients. The owner believes that the commercial sector has more growth opportunities and is considering dropping the residential service. Twenty employees worked a total of 42,000 hours last year, 26,000 on residential jobs and 16,000 on commercial jobs. Wages were $16 per hour for all work done. Any materials used are included in overhead as supplies. All overhead is allocated on the basis...
Elite Lawn & Plowing (EL&P) is a lawn and snow plowing service with both residential and...
Elite Lawn & Plowing (EL&P) is a lawn and snow plowing service with both residential and commercial clients. The owner believes that the commercial sector has more growth opportunities and is considering dropping the residential service. Twenty employees worked a total of 33,000 hours last year, 22,000 on residential jobs and 11,000 on commercial jobs. Wages were $16 per hour for all work done. Any materials used are included in overhead as supplies. All overhead is allocated on the basis...
Jolly Cleaners offers residential and commercial cleaning services. Clients pay a fixed monthly fee for the...
Jolly Cleaners offers residential and commercial cleaning services. Clients pay a fixed monthly fee for the service, but can cancel the service at the end of any month. In addition to the employees who do the actual cleaning, the firm includes two managers who handle the administrative tasks (human resources, accounting, and so on) and one dispatcher, who assigns the cleaning employees to jobs on a daily basis. On average, residential clients pay $330 per month for cleaning services and...
Jolly Cleaners offers residential and commercial cleaning services. Clients pay a fixed monthly fee for the...
Jolly Cleaners offers residential and commercial cleaning services. Clients pay a fixed monthly fee for the service, but can cancel the service at the end of any month. In addition to the employees who do the actual cleaning, the firm includes two managers who handle the administrative tasks (human resources, accounting, and so on) and one dispatcher, who assigns the cleaning employees to jobs on a daily basis. On average, residential clients pay $240 per month for cleaning services and...
Jolly Cleaners offers residential and commercial cleaning services. Clients pay a fixed monthly fee for the...
Jolly Cleaners offers residential and commercial cleaning services. Clients pay a fixed monthly fee for the service, but can cancel the service at the end of any month. In addition to the employees who do the actual cleaning, the firm includes two managers who handle the administrative tasks (human resources, accounting, and so on) and one dispatcher, who assigns the cleaning employees to jobs on a daily basis. On average, residential clients pay $320 per month for cleaning services and...
Cardiff and Delp is an architectural firm that provides services for residential construction projects. The following...
Cardiff and Delp is an architectural firm that provides services for residential construction projects. The following data pertain to a recent reporting period.    Activities Costs Design department Client consultation 1,900 contact hours $ 266,000 Drawings 1,400 design hours 76,300 Modeling 44,000 square feet 30,800 Project management department Supervision 1,200 days $ 192,000 Billings 11 jobs 8,600 Collections 11 jobs 19,340 Required: 1. & 2. Using ABC, compute the firm's activity overhead rates. Form activity cost pools where appropriate. Assign...
Progressive Painting Company (PPC) is a successful company in commercial and residential painting. PPC has a...
Progressive Painting Company (PPC) is a successful company in commercial and residential painting. PPC has a variety of jobs: new construction, repair and repainting existing structures, and restoration of very old buildings and homes. The company is known for the quality and reliability of its work, and customers expect to pay a little more for those benefits. One of the company’s core values is sustainability, and it insists on using the most environmentally friendly paints and materials in its work;...
The Green Thumb Gardening Service provides gardening services to its clients. The company uses an activity-based...
The Green Thumb Gardening Service provides gardening services to its clients. The company uses an activity-based costing system for its overhead costs. The company has provided the following data from its activity-based costing system. Activity Cost Pool   Total Cost    Total Activity Gardening $150,575 18,500 hours Job support 29,375 1,815 jobs Client support 5,270 270 clients Other    65,000 Not applicable Total    $250,220 The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. One particular client,...
Wendy Chen established Windy City Coaching (WCC) to provide teen counseling and executive coaching services to...
Wendy Chen established Windy City Coaching (WCC) to provide teen counseling and executive coaching services to its clients. WCC charges a $300 fee per hour for each service. The revenues and costs for the year are shown in the following income statement: WINDY CITY COACHING Income Statement Teen Counseling Executive Coaching Total Revenue $ 66,000 $ 147,000 $ 213,000 Expenses: Administrative support 44,000 Transportation, etc 35,360 Equipment 16,800 Profit $ 116,840 WCC has kept good records of the following data...
We Care is an outpatient surgical clinic that was profitable for many years, but Medicare has...
We Care is an outpatient surgical clinic that was profitable for many years, but Medicare has cut its reimbursements by as much as 40%. As a result, the clinic wants to better understand its costs. It decides to prepare an activity-based cost analysis, including an estimate of the average cost of both general surgery and orthopedic surgery. The clinic’s three cost centers and their cost drivers follow.    Cost Center Cost Cost Driver Driver Quantity   Professional salaries $ 1,200,000 Professional...