LawnCare USA provides lawn care and landscaping services to commercial clients. LawnCare USA uses activity-based costing to bid on jobs and to evaluate their profitability. LawnCare USA reports the following budgeted annual costs: Wages and salaries Depreciation Supplies Other overhead $360,000 72,000 ు.© 288,000 $840,000 Total overhead costs John Gilroy, controller of LawnCare USA, has established four activity cost pools and the following bud- geted activity for each cost poot: Activity Cost Pool Estimating jobs Total Activity for the Year 250 estimates Activity Measure Number of job estimates Lawn care Number of direct labor-hours 10,000 direct labor-hours 500 design hours Not applicable Landscape design Number of design hours Facility-sustaining costs that are not allocated to jobs Other Gilroy estimates that LawnCare USA's costs are distributed to the activity-cost pools as follows: Landscape Design 15% Estimating Jobs Lawn Care 70% Other 10% Total 100% Wages and salaries Depreciation Supplies Other overhead 5% 10% 65% 10% 15% 100% 0% 100% 0% 0% 100% 15% 50% 20% 15% 100% Sunset Office Park, a new development in a nearby community, has contacted LawnCare USA to provide an estimate on landscape design and annual lawn maintenance, The job is estimated to require a single landscape design requiring 40 design hours in total and 250 direct labor-hours annually. LawnCare USA has a policy of pricing estimates at 150% of cost.
LawnCare USA provides lawn care and landscaping services to commercial clients. LawnCare USA uses activity-based costing to bid on jobs and to evaluate their profitability. LawnCare USA reports the following budgeted annual costs: Wages and salaries Depreciation Supplies Other overhead $360,000 72,000 ు.© 288,000 $840,000 Total overhead costs John Gilroy, controller of LawnCare USA, has established four activity cost pools and the following bud- geted activity for each cost poot: Activity Cost Pool Estimating jobs Total Activity for the Year 250 estimates Activity Measure Number of job estimates Lawn care Number of direct labor-hours 10,000 direct labor-hours 500 design hours Not applicable Landscape design Number of design hours Facility-sustaining costs that are not allocated to jobs Other Gilroy estimates that LawnCare USA's costs are distributed to the activity-cost pools as follows: Landscape Design 15% Estimating Jobs Lawn Care 70% Other 10% Total 100% Wages and salaries Depreciation Supplies Other overhead 5% 10% 65% 10% 15% 100% 0% 100% 0% 0% 100% 15% 50% 20% 15% 100% Sunset Office Park, a new development in a nearby community, has contacted LawnCare USA to provide an estimate on landscape design and annual lawn maintenance, The job is estimated to require a single landscape design requiring 40 design hours in total and 250 direct labor-hours annually. LawnCare USA has a policy of pricing estimates at 150% of cost.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Topic Video
Question
Q.Allocate LawnCare USA’s costs to the activity-cost pools and determine the activity rate for each pool.
Transcribed Image Text:LawnCare USA provides
lawn care and landscaping services to commercial clients. LawnCare USA uses activity-based costing to
bid on jobs and to evaluate their profitability. LawnCare USA reports the following budgeted annual costs:
Wages and salaries
Depreciation
Supplies
Other overhead
$360,000
72,000
ు.©
288,000
$840,000
Total overhead costs
John Gilroy, controller of LawnCare USA, has established four activity cost pools and the following bud-
geted activity for each cost poot:
Activity Cost Pool
Estimating jobs
Total Activity for the Year
250 estimates
Activity Measure
Number of job estimates
Lawn care
Number of direct labor-hours
10,000 direct labor-hours
500 design hours
Not applicable
Landscape design
Number of design hours
Facility-sustaining costs that are not
allocated to jobs
Other
Gilroy estimates that LawnCare USA's costs are distributed to the activity-cost pools as follows:
Landscape
Design
15%
Estimating Jobs
Lawn Care
70%
Other
10%
Total
100%
Wages and salaries
Depreciation
Supplies
Other overhead
5%
10%
65%
10%
15%
100%
0%
100%
0%
0%
100%
15%
50%
20%
15%
100%
Sunset Office Park, a new development in a nearby community, has contacted LawnCare USA to provide
an estimate on landscape design and annual lawn maintenance, The job is estimated to require a single
landscape design requiring 40 design hours in total and 250 direct labor-hours annually. LawnCare USA has
a policy of pricing estimates at 150% of cost.
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