Heidt Cleaning Services (HCS) is a local custodial service company serving both the residential and commercial...

Transcribed Image Text:

Heidt Cleaning Services (HCS) is a local custodial service company serving both the residential and commercial markets. The owner is considering dropping the commercial clients because that business seems only marginally profitable. Twenty-five employees worked a total of 49,500 hours last year, 33,000 on commercial jobs and 16,500 on residential jobs. Wages were $20 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. Given current economic conditions and competition, HCS bills residential clients $40 per hour and commercial clients $30 per hour. Required: a. If overhead for the year was $440,700, what were the profits of the residential and commercial services using labor-hours as the allocation base? Note: Do not round intermediate calculations. Round final answers to the nearest whole dollar. b. Overhead consists of costs of supervision, equipment used (including vehicle rental), and supplies used, which can be traced as follows: Cost Driver Volume Commercial Activity Supervision Equipment depreciation and lease Miscellaneous supplies Total overhead Cost Driver Number of clients served. Equipment hours Area serviced in square yards Cost $ 50,400 205,500 184, 800 $ 440,700 20 3,000 76,000 Recalculate total overhead and profits for commercial and residential services based on these activity bases. Note: Round Intermediate calculations to 2 decimal places. a. Revenue a. Direct Labor a. Overhead a. Profit b. Total Overhead b. Profit Commercial Residential Residential 64 2,000 36,000 Heidt Cleaning Services (HCS) is a local custodial service company serving both the residential and commercial markets. The owner is considering dropping the commercial clients because that business seems only marginally profitable. Twenty-five employees worked a total of 49,500 hours last year, 33,000 on commercial jobs and 16,500 on residential jobs. Wages were $20 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. Given current economic conditions and competition, HCS bills residential clients $40 per hour and commercial clients $30 per hour. Required: a. If overhead for the year was $440,700, what were the profits of the residential and commercial services using labor-hours as the allocation base? Note: Do not round intermediate calculations. Round final answers to the nearest whole dollar. b. Overhead consists of costs of supervision, equipment used (including vehicle rental), and supplies used, which can be traced as follows: Cost Driver Volume Commercial Activity Supervision Equipment depreciation and lease Miscellaneous supplies Total overhead Cost Driver Number of clients served. Equipment hours Area serviced in square yards Cost $ 50,400 205,500 184, 800 $ 440,700 20 3,000 76,000 Recalculate total overhead and profits for commercial and residential services based on these activity bases. Note: Round Intermediate calculations to 2 decimal places. a. Revenue a. Direct Labor a. Overhead a. Profit b. Total Overhead b. Profit Commercial Residential Residential 64 2,000 36,000

Answer rating: 100% (QA)

Given information Heidt Cleaning Services HCS has 25 employees They worked a total of 49500 hours last year 33000 on commercial jobs and 16500 on resi... View the full answer