Heidt Cleaning Services (HCS) is a local custodial service company serving both the residential and commercial markets. The owner is considering dropping the commercial clients because that business seems only marginally profitable. Twenty-five employees worked a total of 45,300 hours last year, 30,200 on commercial jobs and 15,100 on residential jobs. Wages were $20 per hour for all work done. Any materials used are included in overhead as supplies. All overhead is allocated on the basis of labor-hours worked, which is also the basis for customer charges. Given current economic conditions and competition, HCS bills residential clients $40 per hour and commercial clients $30 per hour. Required: a. If overhead for the year was $404,580, what were the profits of the residential and commercial services using labor-hours as the allocation base? Note: Do not round intermediate calculations. Round final answers to the nearest whole dollar. b. Overhead consists of costs of supervision, equipment used (including vehicle rental), and supplies used, which can be traced as follows: Activity Supervision Equipment depreciation and lease Miscellaneous supplies Cost Driver Number of clients served Equipment hours Area serviced in square yards Total overhead Cost $ 47,460 Cost Driver Volume Commercial Residential 188,000 169,120 20 3,000 64 2,000 76,000 36,000 $ 404,580 Recalculate total overhead and profits for commercial and residential services based on these activity bases. Note: Round intermediate calculations to 2 decimal places. a. Revenue a. Direct Labor a. Overhead a. Profit b. Total Overhead b. Profit Commercial Residential
Heidt Cleaning Services (HCS) is a local custodial service company serving both the residential and commercial markets. The owner is considering dropping the commercial clients because that business seems only marginally profitable. Twenty-five employees worked a total of 45,300 hours last year, 30,200 on commercial jobs and 15,100 on residential jobs. Wages were $20 per hour for all work done. Any materials used are included in overhead as supplies. All overhead is allocated on the basis of labor-hours worked, which is also the basis for customer charges. Given current economic conditions and competition, HCS bills residential clients $40 per hour and commercial clients $30 per hour. Required: a. If overhead for the year was $404,580, what were the profits of the residential and commercial services using labor-hours as the allocation base? Note: Do not round intermediate calculations. Round final answers to the nearest whole dollar. b. Overhead consists of costs of supervision, equipment used (including vehicle rental), and supplies used, which can be traced as follows: Activity Supervision Equipment depreciation and lease Miscellaneous supplies Cost Driver Number of clients served Equipment hours Area serviced in square yards Total overhead Cost $ 47,460 Cost Driver Volume Commercial Residential 188,000 169,120 20 3,000 64 2,000 76,000 36,000 $ 404,580 Recalculate total overhead and profits for commercial and residential services based on these activity bases. Note: Round intermediate calculations to 2 decimal places. a. Revenue a. Direct Labor a. Overhead a. Profit b. Total Overhead b. Profit Commercial Residential
Chapter2: Building Blocks Of Managerial Accounting
Section: Chapter Questions
Problem 4EA: Hicks Contracting collects and analyzes cost data in order to track the cost of installing decks on...
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Transcribed Image Text:Heidt Cleaning Services (HCS) is a local custodial service company serving both the residential and commercial markets. The owner is
considering dropping the commercial clients because that business seems only marginally profitable.
Twenty-five employees worked a total of 45,300 hours last year, 30,200 on commercial jobs and 15,100 on residential jobs. Wages
were $20 per hour for all work done. Any materials used are included in overhead as supplies. All overhead is allocated on the basis
of labor-hours worked, which is also the basis for customer charges. Given current economic conditions and competition, HCS bills
residential clients $40 per hour and commercial clients $30 per hour.
Required:
a. If overhead for the year was $404,580, what were the profits of the residential and commercial services using labor-hours as the
allocation base?
Note: Do not round intermediate calculations. Round final answers to the nearest whole dollar.
b. Overhead consists of costs of supervision, equipment used (including vehicle rental), and supplies used, which can be traced as
follows:
Activity
Supervision
Equipment depreciation and lease
Miscellaneous supplies
Cost Driver
Number of clients served
Equipment hours
Area serviced in square yards
Total overhead
Cost
$ 47,460
Cost Driver Volume
Commercial
Residential
188,000
169,120
20
3,000
64
2,000
76,000
36,000
$ 404,580
Recalculate total overhead and profits for commercial and residential services based on these activity bases.
Note: Round intermediate calculations to 2 decimal places.
a. Revenue
a. Direct Labor
a. Overhead
a. Profit
b. Total Overhead
b. Profit
Commercial
Residential
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