Green Thumb Gardening is a small gardening service that uses activity-based cost
ID: 2565077 • 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 belleves that costs are driven primarlly 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 maintalning garden beds depends on whether the beds are low malntenance beds (malnly ordinary trees and shrubs) or high malntenance beds (malnly 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 Miles 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 $87,4 175,0ee square feet of lawn $40,000 29,0ee square feet of low maintenance beds 63,020 23,0ee square feet of high maintenance beds $ 3,800 20,0ee miles $ 7,9ee 2e customers Requirec Compute the activity rate for each of the activity cost pools. (Round your answers to 2 declmal places.) vity 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 Rate per square ft of lawn per square ft of low maintenance beds per square ft of high maintenance beds per mile per customerExplanation / Answer
Green Thumb Gardening
Activity Cost Pool
Activity Rate
Caring for Lawn
$0.50
per square ft. lawn
Caring for garden beds - low maintenance
$1.38
per square ft. of low maintenance beds
Caring for garden beds - high maintenance
$2.74
per square ft. of high maintenance beds
Travel to jobs
$0.19
per mile
Customer billing and service
$395
per customer
Calculations –
Activity Cost Pool
Estimated Overhead Cost
Expected Activity
Activity Rate
Caring for Lawn
$87,400
175,000 Sq. ft of lawn
87,400/175,000
$0.50
per square ft. lawn
Caring for garden beds - low maintenance
$40,000
29,000 Sq. Ft of LMB
40,000/29,000
$1.38
per square ft. of low maintenance beds
Caring for garden beds - high maintenance
$63,020
23,000 Sq. Ft. of HMB
63,020/23,000
$2.74
per square ft. of high maintenance beds
Travel to jobs
$3,800
20,000 miles
3,800/20,000
$0.19
per mile
Customer billing and service
$7,900
20 customers
7,900/20
$395
per customer
Note – LMB – low maintenance beds
HMB – high maintenance beds
Activity Cost Pool
Activity Rate
Caring for Lawn
$0.50
per square ft. lawn
Caring for garden beds - low maintenance
$1.38
per square ft. of low maintenance beds
Caring for garden beds - high maintenance
$2.74
per square ft. of high maintenance beds
Travel to jobs
$0.19
per mile
Customer billing and service
$395
per customer
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