Question
Patterson Lawn Company is the primary provider of lawn care maintenance in the city of Jasper. The Company has two operating departments, one that
Patterson Lawn Company is the primary provider of lawn care maintenance in the city of Jasper. The Company has two operating departments, one that performs lawn care services for commercial properties and one that services residential properties. Both operating departments are supported by two service departments, administrative and machine maintenance. Costs for each of these supporting departments are as follows: Total cost Administrative $192,000 Machine Maintenance $260,000 The following estimates that are related to the operating departments as follows: Commercial properties Residential properties Total Number of employees 40 Number of customers Number of billable hours 125 3,000 Total overhead cost $ 460,000 20 160 2,000 $ 378,000 60 285 5,000 $ 838,000 "Note that total overhead cost includes costs allocated from service departments and other overhead costs. The Company uses the direct method to allocate service department cost to the operating departments. In order to allocate administrative costs, the Company has elected to use the number of employees as the cost driver. To allocate machine maintenance costs, the Company uses the number of billable hours as the cost driver. Based on the information provided, how much of the administrative cost will be allocated to the residential properties operating department?
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