Ms. Greenthumb, Inc., is a lawn and garden care service. The company originally specialized in serving small residential clients, but has recently started contracting for work on larger apartment and office building grounds. Since Ms. Greenthumb believes that commercial lawn care is more profitable, she is considering dropping residential services altogether.

Five field employees worked a total of 10,000 hours last year, 6,500 on residential jobs and 3,500 on commercial jobs. Wages amounted to $9.00 per hour for all work done. Direct 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 greater competition for commercial accounts, Ms. Greenthumb can charge $22 per hour for residential work but only $19 per hour for commercial work.

a. If overhead for the year was $62,000, what were the profits of commercial and residential service using labor-hours as the allocation base?

b. Overhead consists of transportation, equipment use costs and supplies. These costs can be traced to the following activities: