Elite Lawn & Plowing (ELAP) is a lawn and snow plowing service with both residential and commercial clents. The owner beleves that the commercial sector has more growth opportunities and is considering dropping the residential service. Twenty employees worked a total of 20,000 hours last year, 13,000 on residential jobs and 7,000 on commercial jobs. Wages were $25 per hour for all work done. Any materials used are Included in overhead as supplies. Al overhead is allocated on the basis of labor-hours worked, which is also the basis for customer charges. Because of increased compettion for commercial accounts, ELSP can charge $60 per hour for residential work, but only $45 per hour for commercial work Required: af overmead for the year was $205.000, what were the profits of the residential and commercial services using labor-hours as the alocation base? b. Overhead consists of costs of traveling to the site, using equipment (including vehicle renta and using supplies, which can be traced as follows. Cost Driver Volune Commerei4l eaidential Activity Treveling Caing equipnent Uing supplies Total overhead Cost briver Cost $25,000 60,000 120,000 Sutber of elients served 24 1,715 65,000 76 1,225 35,000 qaipnent hours Area serviced in square yards s20s.000 Recalculate profits for commercial and residential services besed on these activity bases. (Round intermediate calculations to 2 decimal places) Commercial Residential Rovenue Direct Labor Overhead Proft Tota Overhead Proft
Elite Lawn & Plowing (ELAP) is a lawn and snow plowing service with both residential and commercial clents. The owner beleves that the commercial sector has more growth opportunities and is considering dropping the residential service. Twenty employees worked a total of 20,000 hours last year, 13,000 on residential jobs and 7,000 on commercial jobs. Wages were $25 per hour for all work done. Any materials used are Included in overhead as supplies. Al overhead is allocated on the basis of labor-hours worked, which is also the basis for customer charges. Because of increased compettion for commercial accounts, ELSP can charge $60 per hour for residential work, but only $45 per hour for commercial work Required: af overmead for the year was $205.000, what were the profits of the residential and commercial services using labor-hours as the alocation base? b. Overhead consists of costs of traveling to the site, using equipment (including vehicle renta and using supplies, which can be traced as follows. Cost Driver Volune Commerei4l eaidential Activity Treveling Caing equipnent Uing supplies Total overhead Cost briver Cost $25,000 60,000 120,000 Sutber of elients served 24 1,715 65,000 76 1,225 35,000 qaipnent hours Area serviced in square yards s20s.000 Recalculate profits for commercial and residential services besed on these activity bases. (Round intermediate calculations to 2 decimal places) Commercial Residential Rovenue Direct Labor Overhead Proft Tota Overhead Proft
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
A. If overhead for the year was $205,000, what were the profits of the residential and commercial services using labor-hours as the allocation base?
B. Overhead consists of costs of traveling to the site, using equipment (including vehicle rental), and using supplies, which can be traced as follows.
Transcribed Image Text:**Elite Lawn & Plowing (EL&P) Service Overview**
*Elite Lawn & Plowing (EL&P)* is a lawn and snow plowing service catering to both residential and commercial clients. The company is evaluating the profitability of its residential services, as the commercial sector shows potential for growth.
**Workforce and Pricing**
- Total work hours last year: 20,000 hours (13,000 residential, 7,000 commercial)
- Wages: $25/hour (materials included in overhead)
- Commercial charge: $45/hour
- Residential charge: $60/hour
**Overhead Costs**
- Total overhead: $205,000, allocated based on labor-hours worked
- Overhead activities: traveling, using equipment, and using supplies
**Cost Breakdown by Activity:**
1. **Traveling**
- Cost: $25,000
- Cost Driver: Number of clients served
- Volume: 475 commercial, 225 residential
2. **Using Equipment**
- Cost: $120,000
- Cost Driver: Hours of equipment use
- Volume: 5,000 commercial, 13,000 residential
3. **Using Supplies**
- Cost: $60,000
- Cost Driver: Area serviced in square yards
- Volume: 45,000 commercial, 35,000 residential
**Graph/Diagram Explanation**
A table is provided that requires recalculating profits for commercial and residential services. The table includes the following:
- Revenue
- Direct Labor
- Overhead
- Total Overhead
- Profit
**Instructions for Recalculation**
Recalculate the profits for commercial and residential services based on activity bases. Intermediate calculations should be rounded to two decimal places to determine profitability accurately.
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