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
Related questions
Question
Sunset Office Park asks LawnCare USA to give an estimate for providing its services for a 2-year period. What are the advantages and disadvantages for LawnCare USA to provide a 2-year estimate?
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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