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 20,000 hours last year, 13,000 on residential jobs and 7,000 on commercial jobs. Wages were $25 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 $60 per hour for residential work, but only $45 per hour for commercial work. Required: a. If overhead for the year was $205,000, what were the profits of the residential and commercial services using labor-hours as the allocation base? 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 Commercial Residential 76 Activity Traveling Using equipment Using supplies Cost $ 25,000 60,000 120,000 $205,000 Cost Driver Number of clients served 24 Equipment hours Area serviced in square yards 1,775 65,000 1,225 35,000 Total overhead
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 20,000 hours last year, 13,000 on residential jobs and 7,000 on commercial jobs. Wages were $25 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 $60 per hour for residential work, but only $45 per hour for commercial work. Required: a. If overhead for the year was $205,000, what were the profits of the residential and commercial services using labor-hours as the allocation base? 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 Commercial Residential 76 Activity Traveling Using equipment Using supplies Cost $ 25,000 60,000 120,000 $205,000 Cost Driver Number of clients served 24 Equipment hours Area serviced in square yards 1,775 65,000 1,225 35,000 Total overhead
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Hello question is attached, thanks.
![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 20,000 hours last year, 13,000 on residential jobs and 7,000 on commercial jobs. Wages were $25 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 $60 per hour for residential work, but only $45 per hour for commercial work.
**Required:**
a. If overhead for the year was $205,000, what were the profits of the residential and commercial services using labor-hours as the allocation base?
b. Overhead consists of costs of traveling to the site, using equipment (including vehicle rental), and using supplies, which can be traced as follows.
| Activity | Cost Driver | Cost | Cost Driver Volume | Commercial | Residential |
|-------------------|------------------------------|---------|---------------------|------------|-------------|
| Traveling | Number of clients served | $25,000 | | 24 | 76 |
| Using equipment | Equipment hours | $60,000 | | 1,775 | 1,225 |
| Using supplies | Area serviced in square yards| $120,000| | 65,000 | 35,000 |
| **Total overhead**| | **$205,000** | | | |
This table provides a breakdown of overhead costs according to different activities, correlated with specific cost drivers such as the number of clients served, equipment hours, and area serviced in square yards. Commercial services have significantly fewer clients but require more equipment hours and a greater area serviced compared to residential services.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fef18cb14-9a47-40a9-9006-9c9e041022ca%2F20bcfa76-9308-4e43-8f09-fa3c443df809%2F4okn47_processed.png&w=3840&q=75)
Transcribed Image Text: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 20,000 hours last year, 13,000 on residential jobs and 7,000 on commercial jobs. Wages were $25 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 $60 per hour for residential work, but only $45 per hour for commercial work.
**Required:**
a. If overhead for the year was $205,000, what were the profits of the residential and commercial services using labor-hours as the allocation base?
b. Overhead consists of costs of traveling to the site, using equipment (including vehicle rental), and using supplies, which can be traced as follows.
| Activity | Cost Driver | Cost | Cost Driver Volume | Commercial | Residential |
|-------------------|------------------------------|---------|---------------------|------------|-------------|
| Traveling | Number of clients served | $25,000 | | 24 | 76 |
| Using equipment | Equipment hours | $60,000 | | 1,775 | 1,225 |
| Using supplies | Area serviced in square yards| $120,000| | 65,000 | 35,000 |
| **Total overhead**| | **$205,000** | | | |
This table provides a breakdown of overhead costs according to different activities, correlated with specific cost drivers such as the number of clients served, equipment hours, and area serviced in square yards. Commercial services have significantly fewer clients but require more equipment hours and a greater area serviced compared to residential services.
![**Title:** Recalculation of Profits for Commercial and Residential Services
**Overview:**
This task involves recalculating the profits for commercial and residential services based on specific activity bases. Calculations should be rounded to two decimal places as indicated.
**Table Explanation:**
The table is divided into two main sections, further categorized into columns for Commercial and Residential services. It contains rows representing different components related to financial calculations:
1. **Revenue**
2. **Direct Labor**
3. **Overhead**
4. **Profit**
An additional section under point b:
a. **Total Overhead**
b. **Profit**
Each box under the columns for Commercial and Residential is meant to be filled with calculated values based on given data points. The values are aimed at determining financial outcomes for both service types. No graphs or diagrams are included beyond the table, and the emphasis is on accurate numerical computation and comparison.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fef18cb14-9a47-40a9-9006-9c9e041022ca%2F20bcfa76-9308-4e43-8f09-fa3c443df809%2Ffrw6zc7_processed.png&w=3840&q=75)
Transcribed Image Text:**Title:** Recalculation of Profits for Commercial and Residential Services
**Overview:**
This task involves recalculating the profits for commercial and residential services based on specific activity bases. Calculations should be rounded to two decimal places as indicated.
**Table Explanation:**
The table is divided into two main sections, further categorized into columns for Commercial and Residential services. It contains rows representing different components related to financial calculations:
1. **Revenue**
2. **Direct Labor**
3. **Overhead**
4. **Profit**
An additional section under point b:
a. **Total Overhead**
b. **Profit**
Each box under the columns for Commercial and Residential is meant to be filled with calculated values based on given data points. The values are aimed at determining financial outcomes for both service types. No graphs or diagrams are included beyond the table, and the emphasis is on accurate numerical computation and comparison.
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