Exercise 7-3 Compute Activity Rates [LO3] As You Like It Gardening is a small ga

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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:

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

Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.Omit the "$" sign in your response.)

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 $ 81,000     160,000 square feet of lawn   Caring for garden beds—low maintenance $ 33,600     25,000 square feet of low-maintenance beds   Caring for garden beds—high maintenance $ 51,680     19,000 square feet of high-maintenance beds   Travel to jobs $ 4,600     16,000 miles   Customer billing and service $ 9,500     20 customers Required:

Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.Omit the "$" sign in your response.)

  Activity Cost Pool        Activity Rate                                                              Caring for lawn $ per square foot of lawn   Caring for garden beds—low maintenance $ per square foot of low maintenance beds   Caring for garden beds—high maintenance $ per square foot of high maintenance beds   Travel to jobs $ per mile   Customer billing and service $ per customer

Explanation / Answer

Activity Cost Pool Estimated Overhead Cost (1) Expected Activity                           (2) Acivity Rate (1/2)   Caring for lawn $ 81,000     160,000 square feet of lawn $ 0.5063 per square foot of lawn   Caring for garden beds—low maintenance $ 33,600     25,000 square feet of low-maintenance beds $ 1.344 per square foot of low maintenance beds   Caring for garden beds—high maintenance $ 51,680     19,000 square feet of high-maintenance beds $ 2.72 per square foot of high maintenance beds   Travel to jobs $ 4,600     16,000 miles $ 0.2875 per mile   Customer billing and service $ 9,500     20 custome $ 475 per customer

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