Green Thumb Gardening is a small gardening service that uses activity-based cost
ID: 2552172 • 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 customersExplanation / 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
$80200/175000
$.46 per square foot of lawn
Caring for garden beds-low maintenance
32800
square feet of low maintenance beds
$32800/30000
$1.09 per square foot of low maintenance beds
Caring for garden beds-
high maintenance
68400
square feet of high maintenance beds
$68400/24000
$2.85 per square foot of high maintenance beds
Travel to jobs
4200
miles
$4200/21000
$.20 per mile
Customer billing
and service 8700 customers $8700/28 $310.71per 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
$80200/175000
$.46 per square foot of lawn
Caring for garden beds-low maintenance
32800
square feet of low maintenance beds
$32800/30000
$1.09 per square foot of low maintenance beds
Caring for garden beds-
high maintenance
68400
square feet of high maintenance beds
$68400/24000
$2.85 per square foot of high maintenance beds
Travel to jobs
4200
miles
$4200/21000
$.20 per mile
Customer billing
and service 8700 customers $8700/28 $310.71per customer
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