Prairie Landscaping has enjoyed profits for many years, but new competition has cut service revenue by as much as 30%. As a result, the company wants to better understand its costs. It decides to prepare an activity-based cost analysis, including an estimate of the average cost of both general landscaping services and custom design landscaping services. The company€™s three cost centers and their cost drivers follow

The two main landscaping units and their related data follow.

Required
1. Compute the cost per cost driver for each of the three cost centers.
2. Use the results from part 1 to allocate costs from each of the three cost centers to both the general landscaping and the custom design landscaping units. Compute total cost and average cost per customer for both the general landscaping and the custom design landscaping units.
Analysis Component
3. Without providing computations, would the average cost of general landscaping be higher or lower if all center costs were allocated based on the number of customers?Explain.

Transcribed Image Text:

Cost Center Cost Professional salarles Customer supples... Building cost Cost Driver Professlonal hours Number of customers Square feet Driver Quantity 10,000 500 1,500 .$500,000 125.000 Service Hours Square Feet Customers ..2,500 7.500 500 1,000 400 100 Custom design landscaping