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Plantcare, Inc., is a garden care service. The co...




Plantcare, Inc., is a garden care service. The company originally specialized in serving residential clients but has recently started contracting for work with larger commercial clients. Ms. Plantcare, the owner is considering reducing residential services and increasing commercial lawn care. Five field employees worked a total of 10,000 hours last year ? 6,500 on residential jobs and 3,500 on commercial jobs. Wages were $9 per hour for all work done. Direct materials used were minimal and are included in overhead. All overhead is allocated on the basis of labor hours worked, which is also the basis for customer charges. Because of greater competition for commercial accounts, Ms. Plantcare can charge $22 per hour for residential work but only $19 per hours for commercial work. Required: a. If overhead for the year was $62,000, what were the profits of commercial and residential service using labor hours to allocate overhead? b. Overhead consists of office supplies, garden supplies and depreciation and maintenance on equipment. These costs can be traced to the following activities: Activity Level Activity Cost Driver Cost Commercial Residential Office Supplies Number of Clients Served $8,000 15 45 Equipment Depreciation & Maintenance Equipment Hours 18,000 3,500 2,500 Garden Supplies Area Covered (Square yards of garden x # times serviced per year) 36,000 65,000 35,000 Total Overhead $62,000 Recalculate profits for commercial and residential services based on these activity bases. c. What recommendations do you have for management?


Paper#4347 | Written in 18-Jul-2015

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