Exercise 9-45 (Algo) Activity-Based Costing in a Service Environment (LO 9-3,4,5) 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 39,000 hours last year, 22,000 on residential jobs and 17,000 on commercial jobs. Wages were $16 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 $32 per hour for residential work, but only $26 per hour for commercial work Required: a. If overhead for the year was $140,620, 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 Cost Driver Volume Activity Cost Driver Commercial Residential Traveling Number of clients served $ 17,920 50 Using equipment Equipment hours 40,800 3,900 2,100 Using supplies Area serviced in square yards 81,900 130,000 50,000 Total overhead 5140,620 Cost 14 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.) 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.) Commercial Residential a Revenue Direct Labor Overhead Profit Total Overhead Profit b. The manager of the Personnel Department at City Enterprises has been reading about time-driven ABC and wants to apply it to her department She has identified four basic activities her employees spend most of the their time on Interviewing. Hiring. Assessment, and Separation Processing. The department employs 10 staff who perform these activities. The manager provides the following estimates for the amount of time it takes to complete each of these activities: Interviewing: 50 minutes. Hiring: 65 minutes Assessment: 85 minutes. Separation Processing: 95 minutes, Employees in Personnel work 40-hour weeks with four weeks for vacation of the 40 hours, five are reserved for administrative tasks. training, and so on. The costs of the Personnel Department, including any allocated costs from other staff functions, are 5977.000. During the year, Personnel conducted 1,700 interviews, made 475 hires made 4,000 assessments, and had 275 separations Required: .. What is the cost per minute for activities in Personnel? (Round your answer to 2 decimal places.) b. What is the cost of interviewing and hiring one employee? (Round your intermediate calculations and final answer to 2 decimal places.) c. How many minutes of unused capacity did Personnel have for the year? d. What was the cost of the unused capacity in Personnel? (Round your intermediate calculations to 2 decimal places and round your final answer to the nearest whole dollar) a b Cost per minute Total costs Unused minutes Cost of unused capacity d
