Green Thumb Gardening is a small gardening service that uses activity-based cost
ID: 2573743 • 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 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 already has completed its first stage allocations of costs and has summarized its annual costs and activity as follows:
Required:
Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.)
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 Activity Rate 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 per square ft of lawn per square ft of low maintenance beds per square ft of high maintenance beds per mile per customerExplanation / Answer
Activity rate: Estimated Overhead cost of Activity / Expected Activity Activity Cost Pool Basis Overhead Cost Expected Activity Activity Rate Caring of lawn Sq.feet of lawn 82600 175000 0.472 per Sq. feet of lawn Caring for Garden Beds-Low Sq.feet of low garden 35200 26000 1.354 Per sq. ft of Low garden Caring for Garden Beds- High S.ft of high Garden 57000 20000 2.85 Per sq ft of high Garden Travel to Jobs Miles 4800 17000 0.282 Per miles Customer billing and service Customers 9900 22 450 Per customer
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