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CASE I COMMITMENT AND COSUMPTION OF RESOURCES
Green & Green (G&G) performs various lawn and garden maintenance activities, including lawn mowing, tree and shrub pruning, fertilizing, and treating for pests. Unlike other lawn and garden businesses, G&G also specializes in landscape design and planting. Management is pleased that the design specialty is so much in demand. However, management is concerned because profits have been falling, even though sales have been growing over the past few years.
Description of G&G’s product-line:
The lawn mowing business involves mowing lawns and trimming edges for customers who generally sign up for the season and pay a flat fee based on surface area mowed and trimmed. The layout design business involves both designing a garden and lawn layout and installing the design. Other maintenance includes tree and shrub pruning and application of chemicals.
Revenues and costs of G&G’s product-line:
G&G’s revenues and direct costs (materials and wages) are traced directly to each one of the products in the product-line. However, other indirect costs (equipment and general business costs) are allocated on the basis of revenue. A schedule of G&G’s revenues and costs follow:
|G&G Revenues and Direct Costs |
| |Lawn |Layout |Other | |
| |Mowing |Design |Maintenance |Total |
|Revenues |$ 287,500 |$ 218,750 |$ 312,500 |$ 818,750 |
|Direct Costs |156,250 |70,000 |181,250 |407,500
Green & Green (G&G) performs various lawn and garden maintenance activities, including lawn mowing, tree and shrub pruning, fertilizing, and treating for pests. Unlike other lawn and garden businesses, G&G also specializes in landscape design and planting. Management is pleased that the design specialty is so much in demand. However, management is concerned because profits have been falling, even though sales have been growing over the past few years.
Description of G&G’s product-line:
The lawn mowing business involves mowing lawns and trimming edges for customers who generally sign up for the season and pay a flat fee based on surface area mowed and trimmed. The layout design business involves both designing a garden and lawn layout and installing the design. Other maintenance includes tree and shrub pruning and application of chemicals.
Revenues and costs of G&G’s product-line:
G&G’s revenues and direct costs (materials and wages) are traced directly to each one of the products in the product-line. However, other indirect costs (equipment and general business costs) are allocated on the basis of revenue. A schedule of G&G’s revenues and costs follow:
|G&G Revenues and Direct Costs |
| |Lawn |Layout |Other | |
| |Mowing |Design |Maintenance |Total |
|Revenues |$ 287,500 |$ 218,750 |$ 312,500 |$ 818,750 |
|Direct Costs |156,250 |70,000 |181,250 |407,500