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.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 19E

See similar textbooks

Related questions

Question

Q.LawnCare USA does 30 landscape designs for its customers each year. Estimate the total cost for the Sunset Office park job if LawnCare USA allocated costs of the Landscape Design activity based on the number of landscape designs rather than the number of landscape design-hours. How much would LawnCare USA bid to perform the job? Which cost driver do you prefer for the Landscape Design activity? Why?

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.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 8 steps with 8 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.