Florian Plant Services completed a special landscaping job for Pierre Designs Company

Florian uses ABC and has the following predetermined overhead allocation rates:

Predetermined Overhead
Activity Allocation Base Allocation Rate
Designing Number of designs $275 per design
Planting Number of plants $15 per plant

The Pierre Designs project required $1,200 in landscape materials, $700 in direct labor, one design, and 35 plants.

Requirements:
1. What is the total cost of the work done for Pierre Designs?
2. If Pierre Designs paid $3,900 for the job, what is the operating income or loss?
3. If Florian desires an operating income of 50% of cost, how much should the company charge for the Pierre Designs project?
What will be an ideal response

1.
Direct Materials $1,200
Direct Labor 700
Planting ($15 per plant x 35 plants) 525
Designing ($275 per design x 1 design) 275
Total Cost $2,700

2.
Revenue $3,900
Less: Total Cost 2,700
Operating Income $1,200

3.
Total Cost $2,700
Add: Desired Operating Income ($2,700 x 50%) 1,350
Required Service revenue $4,050