As the manager of grounds maintenance for Latchey, a large insurance company in Missouri, you are responsible for maintaining the grounds surrounding the company’s three buildings, the six entrances to the property, and the recreational facilities, which include a golf course, a soccer fields, jogging and bike paths, and tennis, basketball, and volleyball courts. Maintenance includes gardening (watering, planting, mowing, trimming, removing debris, and so on) and land improvements (e.g., repairing or replacing damaged or worn concrete and gravel areas).

Early in January, you receive a memo from the president of Latchey requesting information about the cost of operating your department for the last 12 months. She has received a bid from Xeriscape Landscapes, Inc., to perform the gardening activities you now perform. You are to prepare cost report that will help her decide whether to keep gardening activities within the company or to outsource the work.

1. Before preparing your report, answer the following questions:

a. What kinds of information do you need about your department?

b. Why is this information relevant?

c. Where would you go to obtain this information (sources)?

d. When would you want to obtain this information?

2. Draft a report showing only headings and line items that best communicate the costs of your department. How would you change your report if the president asked you to reduce the costs of operating your department?

3. One of your department’s cost accounts is the Maintenance Expense –Garden Equipment account.

a. Is this a direct or an indirect cost?

b. Is it a product or a period cost?

c. Is it a variable or a fixed cost?

d. Does the activity add value to Latchey’s provision of insurance services?

e. Is it a budgeted or an actual cost in your report?