Kathy Edwards owns a landscape maintenance service that has two major segments, residential and commercial. Kathy is trying to decide whether she should use traditional costing or activity-based costing for the purpose of allocation of overhead costs, so she develops the following estimates for her analysis and asks you to help.

Kathy Edwards owns a landscape maintenance service that has two major segments, residential and commercial. Kathy is trying to decide whether she should use traditional costing or activity-based costing for the purpose of allocation of overhead costs, so she develops the following estimates for her analysis and asks you to help. Residential Commercial Totals Annual revenues $200,000 $600.000 $800,000 Annual labor costs 120.000 180.000 300.000 Hours of operation 10,000 40,000 50.000 Travel time in hours 2,000 8,000 10,000 The business has overhead costs for equipment maintenance, transportation, and general activities of $360,000, as follows: 1 Cost Pool Cost Pool Amount Cost Driver Equipment Maintenance $150,000 Hours of equipment operation Transportation 90,000 Travel time General activities 120,000 Labor cost Required: A Using activity-based costing, determine the overhead rates for each activity. B Using activity-based costing, allocate the overhead costs to each segment. What is the income for each segment assuming the company uses activity-based costing? D What are your general and specific recommendations to Kathy