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 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: 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 Estimated Overhead Cost $ 86,600 $ 39,200 $ 57,330 $ 3,400 $ 7,100 Expected Activity 190,000 square feet of lawn 27,000 square feet of low maintenance beds 21,000 square feet of high maintenance beds 18,000 miles 26 customers Required: Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.)

Answer 1

Calculate activity rate

Activity cost pool	Activity rate
Caring for lawn	86600/190000 = 0.46 per square ft of lawn
Caring for garden beds-Low maintenance	39200/27000 = 1.45 per square ft of low maintenance beds
Caring for garden beds-High maintenance	57330/21000 = 2.73 per square ft of high maintenance beds
Travel to jobs	3400/18000 = 0.19 per mile
Customer billing and service	7100/26 = 273.08 per customer