Chapter 7 Saved Help Save & Exit Submit Check my work Green Thumb Gardening is a

ID: 2529984 • Letter: C

Question

Chapter 7 Saved Help Save & Exit Submit Check my work Green Thumb 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: 2.5 points Activity Cost Pool Caring for lawn Caring for garden beds-low maintenance Caring for garden beds-high maintenance Travel to jobs Customer billing and service Activity Measure eBook Hint Print References Square feet of lawn Square feet of low maintenance beds Square feet of high maintenance beds Miles Number of customers The company already has completed its first stage allocations of costs and has summarized its annual costs and activity as follows: Estimated Overhead Activity Cost Pool Caring for lawn Caring for garden beds-low maintenance Caring for garden beds-high maintenance Travel to jobs Customer billing Expected Activity Cost 83,400 180,000 square feet of lawn 36,000 25,000 square feet of low maintenance beds 52,250 19,000 square feet of high maintenance beds $ 4,000 16,000 miles $ 8,300 and service 34 customers

Explanation / Answer

Computation of activity rate for each of the activity cost pools.

Activity Cost Pool

Estimated Overhead Cost

(a)

Expected Activity

(b)

Activity Rate

(a)/ (b)

Caring for lawn

83,400.00

180,000.00

0.46

Per square ft of lawn

Caring for beds low maintenance

36,000.00

25,000.00

1.44

Per square ft of law maintenance beds

Caring for beds high maintenance

52,250.00

19,000.00

2.75

Per square ft of high maintenance beds

Travel to jobs

4,000.00

16,000.00

0.25

Per mile

Customer billing and services

8300

244.12

Per customer