Earth and Artistry, Inc., provides commercial landscaping services. Sasha wants to develop cost estimates that she can use to prepare bids on jobs. After analyzing the firm's costs, Cairns has developed the following preliminary cost estimates for each $1,000$ square feet of landscaping.

Cairns is quite certain about the estimates for direct material and direct labor. However, she is not as comfortable with the overhead estimate. The estimate for overhead is based on the overhead costs that were incurred during the past $12$ months as presented in the following schedule. The estimate of $$18$ per direct$-$labor hour was determined by dividing the total overhead costs for the $12-$month period $($$$648,000)$ by the total direct$-$labor hours $(36,000).$

$\backslash$table$[[,$Total Overhead,$\backslash$table$[[$Regular Direct$-],[$Labor Hours$]],\backslash$table$[[$Overtime Direct$-],[$Labor Hours$*]],\backslash$table$[[$Total Direct$-],[$Labor Hours$]]],[$January$,$$$54,000,2,910,190,3,100],[$February$,47,000,2,380,20,2,400],[$March$,48,000,2,210,40,2,250],[$April$,56,000,2,590,210,2,800],[$May$,57,000,3,030,470,3,500],[$June$,65,000,3,240,760,4,000],[$July$,64,000,3,380,620,4,000],[$August$,56,000,3,050,350,3,400],[$September$,53,000,2,760,40,2,800],[$October$,47,000,2,770,30,2,800],[$November$,47,000,2,120,{240}_{?},],[$December$,54,{000}_{?},33,{000}_{?},3,{000}_{?},2,150],[$Total$,$$$648,{000}_{?},2,{800}_{?},,],[$The overtime premium is$,50,$percent of the direct$-$labor wage rate.,,$]]$

Cairns believes that overhead is affected by total monthly direct$-$labor hours. Cairns aform a least$-$squares regression of overhead $(OH)$ on total direct$-$labor hours $($DLH$).$ The gression formula was obtained.

$OH=26,200+9\mathrm{.}25DH$

quired:

The overhead rate developed from the least$-$squares regression is different from Cairns' nary estimate of $$18$ per direct$-$labor hour. Explain the difference in the two overhead rat Using the overhead formula that was derived from the least$-$squares regression, determin variable$-$cost estimate for each $1,000$ square feet of landscaping.

Cairns has been asked to submit a bid on a landscaping project for the city government con $60,000$ square feet. Cairns estimates that $40$ percent of the direct$-$labor hours required for th will be on overtime, Calculate the incremental costs that should be included in any bid that would submit on this project. Use the overhead formula derived from the least$-$squares regr Should management rely on the overhead formula derived from the least$-$squares regressi basis for the variable overhead component of its cost estimate? Explain your answer.

After attending a seminar on activity$-$based costing, Cairns decided to further analyze the ny$\text{'}$s activities and costs. She discovered that a more accurate portrayal of the firm's cost