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5. After attending a seminar on activity-based costing, Cairns decided to further analyze the companys activities and costs. She discovered that a more accurate portrayal
5. After attending a seminar on activity-based costing, Cairns decided to further analyze the companys activities and costs. She discovered that a more accurate portrayal of the firms cost behavior could be achieved by dividing overhead into three separate pools, each with its own cost driver. Separate regression equations were estimated for each of the cost pools, with the following results. OH1 = $10,700 + $4.00 DLH, where DLH denotes direct-labor hours OH2= $9,100 + $13.50 SFS, where SFS denotes the number of square feet of turf seeded (in thousands) OH3 = $8,600 + $6.30 PL, where PL denotes the number of individual plantings (e.g., trees and shrubs) Assume that 5 direct-labor hours will be needed to landscape each 1,000 square feet, regardless of the specific planting material used. a. Suppose the landscaping project for the city will involve seeding all 56,000 square feet of turf and planting 90 trees and shrubs. Calculate the incremental variable overhead cost that Cairns should include in the bid. b. Recompute the incremental variable overhead cost for the citys landscaping project assuming half of the 56,000-square-foot landscaping area will be seeded and there will be 250 individual plantings. The plantings will cover the entire 56,000-square-foot area
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