Green Thumb Gardening is a small gardening service that uses activity-based cost
ID: 2552165 • 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: 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 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 and service Expected Activity Cost $ 80,200 185,000 square feet of lawn $ 32,800 22,000 square feet of low maintenance beds 43,680 16,000 square feet of high maintenance beds $ 4,000 13,000 miles $ 8,300 20 customers Required Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.) 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 er mile per customerExplanation / Answer
Answer:-
Computation of activity rate for each of the activity cost pools
Activity Cost Pool
Estimated overhead cost $
Expected Activity
Calculation
Activity Rate
Caring for lawn
80200
square feet of lawn
$80200/185000
$.43 per square foot of lawn
Caring for garden beds-low maintenance
32800
square feet of low maintenance beds
$32800/22000
$1.49 per square foot of low maintenance beds
Caring for garden beds-
high maintenance
43680
square feet of high maintenance beds
$43680/16000
$2.73 per square foot of high maintenance beds
Travel to jobs
4000
miles
$4000/13000
$.31 per mile
Customer billing
and service 8300 customers $8300/20 $415per customer
Where
Activity Rate = Estimated Overhead Cost $ / Expected Activity
Activity Cost Pool
Estimated overhead cost $
Expected Activity
Calculation
Activity Rate
Caring for lawn
80200
square feet of lawn
$80200/185000
$.43 per square foot of lawn
Caring for garden beds-low maintenance
32800
square feet of low maintenance beds
$32800/22000
$1.49 per square foot of low maintenance beds
Caring for garden beds-
high maintenance
43680
square feet of high maintenance beds
$43680/16000
$2.73 per square foot of high maintenance beds
Travel to jobs
4000
miles
$4000/13000
$.31 per mile
Customer billing
and service 8300 customers $8300/20 $415per customer
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