Green Thumb Gardening is a small gardening service that uses activity-based cost
ID: 2562822 • Letter: G
Question
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 gardern 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 Caring for lawn Caring for garden beds-low maintenance Caring for garden beds-high maintenance Travel to jobs Customer billing and service Activity Measure Square feet of lawn Square feet of low maintenance beds Square feet of high maintenance beds es 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 Poo!l 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 78,600 175,000 square feet of lawn 31,200 24,000 square feet of low maintenance beds 50,040 18,000 square feet of high maintenance beds $ 4,000 15,000 miles 8,300 22 customers Required: Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.)Explanation / Answer
Activity based costing allocates the most meaningful costs that are incurred during the manufacture of the product to the product.
Activity cost pool
Estimated overhead costs
Base
Rate per activity (Estimated costs/base)
Caring for lawn
78,600.00
1,75,000.00
0.449
Caring for garden beds-low maintenance
31,200.00
24,000.00
1.300
Caring for garden beds-high maintenance
50,000.00
18,000.00
2.780
Travel to jobs
4,000.00
15,000.00
0.267
Customer billing and service
8,300.00
22.00
377.273
Activity cost pool
Estimated overhead costs
Base
Rate per activity (Estimated costs/base)
Caring for lawn
78,600.00
1,75,000.00
0.449
Caring for garden beds-low maintenance
31,200.00
24,000.00
1.300
Caring for garden beds-high maintenance
50,000.00
18,000.00
2.780
Travel to jobs
4,000.00
15,000.00
0.267
Customer billing and service
8,300.00
22.00
377.273
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