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 36,000 hours last year, 26,000 on residential jobs and 10,000 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 $34 per hour for residential work, but only $27 per hour for commercial work.   Required: a. If overhead for the year was $133,320, 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 $14,820 17 40 Using equipment   Equipment hours 40,300 3,900 2,300 Using supplies   Area serviced in square yards 78,200 150,000 80,000 Total overhead     $133,320     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.)            Commercial       Residential a. Revenue       Direct Labor       Overhead       Profit     b. Total Overhead       Profit

Question

 

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 36,000 hours last year, 26,000 on residential jobs and 10,000 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 $34 per hour for residential work, but only $27 per hour for commercial work.

 

Required:

a. If overhead for the year was $133,320, 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 $14,820 17 40
Using equipment   Equipment hours 40,300 3,900 2,300
Using supplies   Area serviced in square yards 78,200 150,000 80,000
Total overhead     $133,320    

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.)

           Commercial       Residential
a. Revenue    
  Direct Labor    
  Overhead    
  Profit    
b. Total Overhead    
  Profit    

 

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