Green thumb, Inc., provides lawn care and landscaping services to commercial clients. Green Thumb uses activity-based costing to bid on jobs and to evaluate their profitability. Green Thumb reports the following annual costs:

Wages and salaries	$300,000
Depreciation	60,000
Supplies	100,000
Other overhead	240,000
Total overhead costs	$700,000

John Gibson, controller of Green Thumb, has established four activity costs pools and estimates that Green Thumb's costs are distributed to the activity-cost pools as follows:

Activity Cost Pool	Activity Measure	Total Activity for the Year
Estimating jobs	Number of job estimatess	250 estimates
Lawn care	Number of direct labor-hours	10,000 direct labor-hours
Landscape design	Number of design hours	500 design hours
Other	Facility-sustaining costs that are not	Not applicable
	allocated to jobs

	Estimating	Lawn	Landscape
	Jobs	Care	Design	Other	Total
Wages and salaries	5%	70%	15%	10%	100%
Depreciation	10%	65%	10%	15%	100%
Supplies	0%	100%	0%	0%	100%
Other overhead	15%	50%	20%	15%	100%

Vista Office Park, a new development in a nearby community, has contacted Green Thumb to provide an estimate on landscape design and annual lawn maintenance. The job is estimated to require a single landscape design requiring 40 design hours in total and 250 direct labor-hours annually. Green Thumb has a policy of pricing estimates at 150% of allocated cost.

Requirements:

Allocate Green Thumb's costs to the activity-cost pools and determine the activity rate for each pool.

2.

Estimate total cost for the Vista Office Park job.

3.

How much should Green Thumb bid to perform the job?

4.

Vista Office Park asks Green Thumb to give an estimate for providing its services for a 2-year period. What are the advantages and disadvantages for Green Thumb to provide a 2-year estimate?

Allocate Green Thumb's costs to the activity-cost pools and determine the activity rate for each pool.

	Estimated	Lawn	Landscape
	jobs	care	design	Other	Total
Wages and salaries
Depreciation
Supplies
Other overhead
Total

Green thumb, Inc., provides lawn care and landscaping services to commercial clients. Green Thumb uses activity-based costing to bid on jobs and to evaluate their profitability.