Exercise 4-5 Activity-based costing versus traditional costing (L.O. 8, 9) Landscape, Inc., is a lawn and garden service. The company originally specialized in serving small residential clients; recently it has started contracting for work on larger office building grounds. Employees worked a total of 10,000 hours last year, 6,500 on residential jobs and 3,500 on commercial jobs. Wages amounted to $10 per hour for all work done. Materials used are included in overhead and called supplies. All overhead is allocated on the basis of laborhours worked, which is also the basis for customer charges. Landscape, Inc., can charge $30 per hour for residential work but, because of greater competition for commercial accounts, only $20 per hour for commercial work.

? Required:

a. Using labor-hours as the basis for allocating overhead, what was the gross margin (revenues minus labor and overhead expense) for (1) commercial and (2) residential service? Assume overhead was $50,000.

b. Overhead consists of transportation, lawn mowing and landscaping equipment costs, depreciation on equipment, supplies, fuels, and maintenance. These costs can be traced to the following activities:

c. Would you advise Landscape, Inc., to drop either the residential or commercial service based on your analysis? Explain.

Chapter 4 (1).pdf - Saved Sign in File Home Insert DesignLayout References MailingsReview View Help Foxit PDF Search Share- AutoSave > Required: Using labor-hours as the basis for allocating overhead, what was the gross margin (revenues minus labor and overhead expense) for (1) commercial and (2) residential service? Assume overhead was $50,000 Overhead consists of transportation, lawn mowing and landscaping equipment costs, depreciation on equipment, supplies, fuels, and maintenance. These costs can be traced to the following activities a. b. Activity Level Commercial Residential Activity Cost Driver Cost Clients served S10,000 15 45 Equipment costs: Fuel, maintenancc 25,000 3.000 2,000 Equipment hours Square yards serviced Supplies per year 15,000 100,000 50,000 Total overhead Recalculate gross margin for commercial and residential services based on these cost driver bases. $50,000 Would you advise Landscape, Inc., to drop either the residential or commercial service based on your analysis? Explain c. Problem 4-4 Activity-based costing versus traditional costing (L.O. 8, 9) C & W Corporation manufactures travel clocks and watches. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended using an activity-based Chapter 4 (1).pdf - 12-31 PM 5/29/2018 Search the web and Windows Chegg Study l Guid... Ali