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 Cusl Pool Caring for lawn Caring for garden beds-low maintenance Caring for garden beds-high riaintenance Travel to jobs Customer billing and service Activity Measure Square foot of lawn Square feet of low maintenance beds Square feet of high maintenance beds Miles Number of customers The company has already completed its first stage allocations of costs and has sumrriarized 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 Custorier billing and service Estimated Ovorhead Cost $ 85,000 $ 37,600 $ 59,430 $ 3,600 $ 7,500 Expected Activity 170,000 square feet of lawn 27,000 square feel of low maintenance beds 21,000 square feet of high maintenance beds 18.000 miles 28 customers Required: Compute the activity rate for each of the activity boat pools. (Round your answers to 2 decimal places.) Activity Cost Pool Activity Rate Caring for lawn Caring for garden beds—ow maintenance Caring for garden buds-high maintenance Travel to jobs per square foot of lawn per square foot of low maintenance beds per square fool or high maintenance per mile Customer billing and service per customer

Answer 1

Solution

Activity Cost Pool	Activity rate
Caring for lawn	$ 0.50	Per square feet of lawn
Caring for garden beds- low maintenance	$ 1.39	Per square feet of low maintenance beds
Caring for garden beds- High maintenance	$ 2.83	Per square feet of High maintenance beds
Travel to jobs	$ 0.20	Per miles
Customer billing and service	$ 267.86	Per customer

Working

Calculation of Activity rates
Activity Cost Pool	Overhead Cost	Activity Driver	Expected Activity (B)	Acttvity rate (A/B)
Caring for lawn	Number of square feet of lawn	$ 85,000.00	170,000	$                 0.50	Per square feet of lawn
Caring for garden beds- low maintenance	Number of square feet of low maintenance beds	$ 37,600.00	27,000	$                 1.39	Per square feet of low maintenance beds
Caring for garden beds- High maintenance	Number of square feet of High maintenance beds	$ 59,430.00	21,000	$                 2.83	Per square feet of High maintenance beds
Travel to jobs	Number of miles	$   3,600.00	18,000	$                 0.20	Per miles
Customer billing and service	Number of customer	$   7,500.00	28	$            267.86	Per customer