Requirement 1. Allocate

Lakeview LawnLakeview Lawn

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

Start by allocating

Lakeview LawnLakeview Lawn

USA's costs to the activity-cost pools. (Enter zero in any cell if no amount should be allocated to the activity-cost pool.)

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

Now select the formula used to determine the cost driver rates, then calculate the activity rate for each pool. (Abbreviation used: DLH = Direct labor-hour. Round the answers to the nearest cent, "X.XX".)

/

=

Cost driver rate

Estimating jobs

/

=

Lawn care

/

=

Landscape design

/

=

Requirement 2. Estimate total cost for the

VistaVista

Office Park job. How much would

Lakeview LawnLakeview Lawn

USA bid to perform the job?

Calculate the total costs and bid amount

Lakeview LawnLakeview Lawn

USA would charge

VistaVista

Office Park. (Round the answers to the nearest cent, "X.XX".)

Estimating jobs
Lawn care
Landscape design
Total costs
Markup multiplier		%
Bid estimate

Requirement 3.

Lakeview LawnLakeview Lawn

USA does

2727

landscape designs for its customers each year. Estimate the total cost for the

VistaVista

Office park job if

Lakeview LawnLakeview Lawn

USA allocated costs of the Landscape Design activity based on the number of landscape designs rather than the number of landscape design-hours. How much would

Lakeview LawnLakeview Lawn

USA bid to perform the job? Which cost driver do you prefer for the Landscape Designactivity? Why?

How much would

Lakeview LawnLakeview Lawn

USA bid to perform the job?

Estimating jobs
Lawn care
Landscape design
Total costs
Markup multiplier		%
Bid estimate

Which cost driver do you prefer for the Landscape Design activity? Why?

While the

VistaVista

Office park landscape design is only one of

2727

performed by

Lakeview LawnLakeview Lawn

USA, it accounts for

less

more

landscape design-hours, making it

less

more

complex than the average design. Using the number of

landscape designs

landscape design-hours

as the cost driver results in a bid estimate that is too low. Using the number of

landscape designs

landscape design-hours

is a more accurate measure of

Lakeview LawnLakeview Lawn

USA's costs for each job because it

distinguishes the costs between simple and complex landscape designs.

results in a more competitive bid price.

simplifies the cost allocation process.

Requirement 4.

VistaVista

Office Park asks

Lakeview LawnLakeview Lawn

USA to give an estimate for providing its services for a 2-year period. What are the advantages and disadvantages for

Lakeview LawnLakeview Lawn

USA to provide a 2-year estimate?

Because the landscape design and estimating costs are only incurred once for the entire job, bidding on a 2 year period

allows Lakeview Lawn USA to be more price competitive.allows Lakeview Lawn USA to be more price competitive.

causes Lakeview Lawn USA's costs to be higher.causes Lakeview Lawn USA's costs to be higher.

However, after submitting an estimate for 2 years,

Lakeview LawnLakeview Lawn

USA would

be locked into the same price comma regardless of cost increases.be locked into the same price, regardless of cost increases.

have guaranteed income benefiting Lakeview Lawn USA's profit margin comma regardless of costs.

Wages and salaries $345,000

Depreciation 68,000 Supplies 100,00

Other overhead 262,000 Total overhead costs $775,000

John

GibsonGibson,

controller of

Lakeview LawnLakeview Lawn

USA, has established four activity cost pools and the following budgeted activity for each cost pool:

Activity Cost Pool	Activity Measure	Total Activity for the Year
Estimating jobs	Number of job estimates	300 estimates
Lawn care	Number of direct labor-hours	5,000 direct labor-hours
Landscape design	Number of design hours	200 design hours
Other	Facility-sustaining costs that are	Not applicable
	not allocated to jobs

GibsonGibson

estimates that

Lakeview LawnLakeview Lawn

USA's costs are distributed to the activity-cost pools as follows:

	Estimating Jobs		Lawn Care		Landscape Design		Other	Total
Wages and salaries	5%		70%		10%		15%	100%
Depreciation	20%		60%		5%		15%	100%
Supplies	0%		100%		0%		0%	100%
Other overhead	5%		40%		25%		30%	100%

Vista

Office Park, a new development in a nearby community, has contacted

Lakeview

USA to provide an estimate on landscape design and annual lawn maintenance. The job is estimated to require a single landscape design

1.	Allocate Lakeview LawnLakeview Lawn USA's costs to the activity-cost pools and determine the activity rate for each pool.
2.	Estimate total cost for the VistaVista Office Park job. How much would Lakeview LawnLakeview Lawn USA bid to perform the job?
3.	Lakeview LawnLakeview Lawn USA does 2727 landscape designs for its customers each year. Estimate the total cost for the VistaVista Office park job if Lakeview LawnLakeview Lawn USA allocated costs of the Landscape Design activity based on the number of landscape designs rather than the number of landscape design-hours. How much would Lakeview LawnLakeview Lawn USA bid to perform the job? Which cost driver do you prefer for the Landscape Design activity? Why?
4.	VistaVista Office Park asks Lakeview LawnLakeview Lawn USA to give an estimate for providing its services for a 2-year period. What are the advantages and disadvantages for Lakeview LawnLakeview Lawn USA to provide a 2-year estimate?