11000 points Exercise 6-3 Compute Activity Rates LO6-3] Green Thumb Gardening is
ID: 2541875 • Letter: 1
Question
11000 points Exercise 6-3 Compute Activity Rates LO6-3] Green Thumb Gardening is a small gardening service that uses activity-based company believes that costs are driven primanily 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 isted below costing to estimate costs for pricing and other purposes. The proprietor of the 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 Adtivity Measure Square feet of Square feet of low maintenance beds Square feet of high maintenance beds Miles Number of customers The company has already completed its first stage allocations of costs and has summarized its annual costs and activity as follows: Estimated 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 Expected Activity Cost S 85,000 37,600 S 44,480 S 3,400 S 7,100 160,000 square feet of lawn 22,000 square feet of low maintenance beds 16,000 square feet of high maintenance beds 13,000 miles 36 customers Required: Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.) MacBook AirExplanation / Answer
Answer
1.
The activity rate for the Caring for lawn activity:
Activity rate = Estimated overhead cost of Caring for lawn / Activity measure
=$85000/160000 = $0.53 per square foot of lawn.
2.
The activity rate for the Caring for garden beds-low maintenance activity:
Activity rate = Estimated overhead cost of garden beds-low maintenance / Activity measure
=$37600/22000 = $1.71 per square foot of low maintenance beds
3.
The activity rate for the Caring for garden beds-high maintenance activity:
Activity rate = Estimated overhead cost of garden beds-high maintenance / Activity measure
=$44480/16000 = $2.78 per square foot of high maintenance beds.
4.
The activity rate for the travel to jobs activity:
Activity rate = Estimated overhead cost of travel to jobs / Activity measure
=$3400/13000 = $0.26 per mile
5.
The activity rate for the customer billing and service activity:
Activity rate = Estimated overhead cost of customer billing and service / Activity measure
=$7100/36 = $197.22 per customer
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