1. Allocate trimmer town USA's costs to the activity-cost pools and determine the activity rate for each pool.

2. Estimate total cost for the waverly Office Park job. How much would USA trimmer town bid to perform the job?

3. trimmer town USA does 28 landscape designs for its customers each year. Estimate the total cost for the waverly Office park job if trimmer town 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 trimmer town USA bid to perform the job? Which cost driver do you prefer for the Landscape Design activity? Why?

4. waverly Office Park asks trimmer town USA to give an estimate for providing its services for a 2-year period. What are the advantages and disadvantages for trimmer town USA to provide a 2-year estimate?

Wages and salaries	$480,000
Depreciation	54,000
Supplies	115,000
Other overhead	164,000
Total overhead costs	$813,000

John

Gibson,

controller of

Trimmer Lawn

USA, has established four activity cost pools and the following budgeted activity for each cost pool:

Activity Cost Pool	Activity Measure	Total Activity for the Year
Estimating jobs	Number of job estimates	100 estimates
Lawn care	Number of direct labor-hours	10,000 direct labor-hours
Landscape design	Number of design hours	600 design hours
Other	Facility-sustaining costs that are not allocated to jobs	Not applicable

Gibson

estimates that

Trimmer Lawn

USA's costs are distributed to the activity-cost pools as follows:

	Estimating Jobs	Lawn Care	Landscape Design	Other	Total
Wages and salaries	5%	70%	20%	5%	100%
Depreciation	15%	45%	5%	35%	100%
Supplies	0%	100%	0%	0%	100%
Other overhead	10%	45%	25%	20%	100%

Waverly

Office Park, a new development in a nearby community, has contacted

Trimmer Lawn

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

100

direct labor-hours annually.

Trimmer Lawn

USA has a policy of pricing estimates at

150%

of cost.