Recalculate profits for commercial and residential services based on these activity bases. (Do not round intermediate calculations. Round final answers to the nearest whole dollar.)
Exercise 9-45 (Algo) Activity-Based Costing in a Service Environment (LO 9-3, 4, 5)
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 39,000 hours last year, 28,000 on residential jobs and 11,000 on commercial jobs. Wages were $14 per hour for all work done. Any materials used are included in
Required:
a. If overhead for the year was $126,680, what were the profits of the residential and commercial services using labor-hours as the allocation base? (Do not round intermediate calculations. Round final answers to the nearest whole dollar.)
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 | $ | 17,360 | 17 | 45 | |||||
| Using equipment | Equipment hours | 40,920 | 3,900 | 2,300 | ||||||
| Using supplies | Area serviced in square yards | 68,400 | 140,000 | 50,000 | ||||||
| Total overhead | $ | 126,680 | ||||||||
Recalculate profits for commercial and residential services based on these activity bases. (Do not round intermediate calculations. Round final answers to the nearest whole dollar.)
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