Green Garden Care, Inc., is a lawn and garden care service. It originally specialized in serving small ina residential clients but recently started contracting for work on office building grounds. Since Glenn Service Environme Greenthumb (owner) believes that commercial lawn care is more profitable, he is considering dropping

(LO 4,5, 6,7) residential services altogether. Miceb eho)

eXc el ~ Employees worked a total of 20,000 hours last year, 13,000 on residential jobs and_7,000 on commercial jobs. Wages and benefits amounted to $10 per hour for all work done. Materials are included in mhhe.conyhilton4e overhead. All overhead is allocated on asis of labor-hours worked, which also is the basis for customer charges. Glenn can chLaarOgeE $e22 per Rhour fOoer ere si deenrteisal work but only $19 per hour for commercial work.

Exercise 4.37 Activity-Based Costi ea Required a

[3ee0 ,~2t Tooe 4/4

a. If overhead for the year w $124, 000, whht were the profits of commercial and residential service LSvCIO [33ee00 using labor-hours as the allocatio oy, eae ‘ B= SO bh oe

(32% %70 Joex iio

b. Overhead consists of costs of transportation! S& uen uasee, “nd:r ages which can be traced to

: 1900) the following activities:

| 2002) Sets Activity Level

+ ((8b 03)) (43 fo) Activity Cost-Driver Base _, Cost Commercial Residential 7$ 400 §G.bco Transportation Number of clients serviced POC $ 16,000 15 45 (pe Equipment use Equipment hours 6 36,000 4,000 2,000 Ge co

: Supplies Area serviced in square, yards __£2,000.. 130,000 70,000 Revac game 8636 8

\ ae (u 2 Total overhead $124,000 Cont See ee

—~ 73S g Recalculate profits for commercial and residential services based on these cost-driver bases. Is the Ss (=D) 12> total overhead cost affected by the choice of traditional or ABC methods for gavel, se is ili ‘Meco Ce duiAtb ts to products? [té Lees CD riianm A & beep, ES Youth (2p

e) 2e se » What recommendations As you ave for manageme Elon the pr Atability ooff Kt heese. Aesh es

[Zee00 413 Yos® G4Z0 = of services?