Exercise 7-3 Compute Activity Rates [LO3] Please explain how you arrived at your

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Exercise 7-3 Compute Activity Rates [LO3]

Please explain how you arrived at your answers - this really helps me a lot! Thank you!

As You Like It Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to customers, and the number of customers. In addition, the costs of maintaining garden beds depends on whether the beds are low-maintenance beds (mainly ordinary trees and shrubs) or high-maintenance beds (mainly flowers and exotic plants). Accordingly, the company uses the five activity cost pools listed below:

     The company has already completed its first-stage allocations of costs. The company’s annual costs and activities are summarized as follows:

Exercise 7-3 Compute Activity Rates [LO3]
As You Like It Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to customers, and the number of customers. In addition, the costs of maintaining garden beds depends on whether the beds are low-maintenance beds (mainly ordinary trees and shrubs) or high-maintenance beds (mainly flowers and exotic plants). Accordingly, the company uses the five activity cost pools listed below:

Activity Cost Pool   Activity Measure
Caring for lawn   Square feet of lawn
Caring for garden beds—low maintenance   Square feet of low-maintenance beds
Caring for garden beds—high maintenance   Square feet of high-maintenance beds
Travel to jobs   Miles
Customer billing and service   Number of customers

The company has already completed its first-stage allocations of costs. The company’s annual costs and activities are summarized as follows:

Activity Cost Pool Estimated Overhead Cost   Expected Activity

Caring for lawn $   87,400 165,000   square feet of lawn
Caring for garden beds—low maintenance $   40,000     27,000   square feet of low-maintenance beds
Caring for garden beds—high maintenance   $   59,850     21,000   square feet of high-maintenance beds
Travel to jobs $   5,000 18,000   miles
Customer billing and service $   10,300     32   customers

As You Like It Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to customers, and the number of customers. In addition, the costs of maintaining garden beds depends on whether the beds are low-maintenance beds (mainly ordinary trees and shrubs) or high-maintenance beds (mainly flowers and exotic plants). Accordingly, the company uses the five activity cost pools listed below:

Explanation / Answer

Statement showing calculation activity rates

Activity Amount Activity measure Rate Caring of lawn 87400 165000 0.53 Caring of garden beds - low maintenance beds 40000 27000 1.48 Caring of garden beds - high maintenance beds 59850 21000 2.85 Travel to job 5000 18000 0.28 Customer billing and service 10300 32 321.875

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