Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Elite Lawn & Plowing (EL&P) is a lawn and snow plowing service with both residential and commercial clients. The owner believes that the commercial
Elite Lawn & Plowing (EL&P) is a lawn and snow plowing service with both residential and commercial clients. The owner believes that the commercial sector has more growth opportunities and is considering dropping the residential service. Twenty employees worked a total of 42,000 hours last year, 25,000 on residential jobs and 17,000 on commercial jobs. Wages were $15 per hour for all work done. Any 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 increased competition for commercial accounts, EL&P can charge $36 per hour for residential work, but only $25 per hour for commercial work. Required: a. If overhead for the year was $124,900, what were the profits of the residential and commercial services using labor-hours as the allocation base? (Do not round intermediate calculations. Round final answers to the nearest whole dollar.) b. Overhead consists of costs of traveling to the site, using equipment (including vehicle rental), and using supplies, which can be traced as follows. Activity Traveling Using equipment Cost Driver Number of clients served Equipment hours Cost Cost Driver Volume Commercial Residential $ 14,820 Using supplies Area serviced in square yards Total overhead 36,580 73,500 $124,900 17 3,900 40 2,000 140,000 70,000 Recalculate profits for commercial and residential services based on these activity bases. (Do not round intermediate calculations. Round final answers to the nearest whole dollar.) a. Revenue Direct Labor b. Overhead Profit Total Overhead Profit Commercial Residential
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started