LawnCare USA provides lawn care and landscaping services to commercial clients. LawnCare USA uses activity-based costing to bid on jobs and to evaluate their profitability. LawnCare USA reports the following annual costs:

Wages and salaries .......$ 360,000

Depreciation ........... 72,000

Supplies ............ 120,000

Other overhead ......... 288,000

Total overhead costs ...... $ 840,000

John Gilroy, controller of LawnCare USA, has established four activity cost pools:

Gilroy estimates that LawnCare USA’s costs are distributed to the activity-cost pools as follows:

Sunset Office Park, a new development in a nearby community, has contacted LawnCare USA to provide an estimate on landscape design and annual lawn maintenance. The job is estimated to require a single landscape design requiring 40 design hours in total and 250 direct labor-hours annually. LawnCare USA has a policy of pricing estimates at 150% of cost.

Required
1. Allocate LawnCare USA’s costs to the activity-cost pools and determine the activity rate for each pool.
2. Estimate total cost for the Sunset Office Park job.
3. How much should LawnCare USA bid to perform the job?
4. Sunset Office Park asks LawnCare USA to give an estimate for providing its services for a 2-year period. What are the advantages and disadvantages for LawnCare USA to provide a 2-yearestimate?

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Activity Cost Pool Estimating jobs Lawn care Landscape design Other Activity Measure Number of job estimates Number of direct labor-hours Number of design hours Facility-sustaining costs that are not allocated to jobs Total Activity for the Year 250 estimates 10,000 direct labor-hours 500 design hours Not applicable Wages and salaries Depreciation Supplies Other overhead Estimating Jobs 5% 10% 0% 15% Lawn Care 70% 65% 100% 50% Landscape Design 15% 10% 0% 20% Other 10% 15% 0% 15% Total 100% 100% 100% 100%