Question

6-12 Help 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: 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 Expected Metivity $72,000 150,000 square feet of lawn $26,400 20,000 square feet of low maintenance hede $ 41.400 15,000 square feet of high maintenance beds $3,250 12,500 miles $8.750 25 customers Required: Compute the activity rate for each of the activity cost pools (Round your answers to 2 decimal places except customer billing and service.) Activity Cost Pool Activity Rate < Prev 2 of 8 !!! Next > JOGA

Answer 1

a)	Calculation of Activity Rate
	Activity	Overhead Cost	Activity Driver	Activity RATE
	Caring for lawn	72,000	150000	sq feet of lawn	0.48	per sq feet of lawn
	Caring for garden beds-low maintenance	26,400	20000	Sq feet of low maintenance beds	1.32	per Sq feet of low maintenance beds
	Caring for garden high-low maintenance	41,400	15000	Sq feet of high maintenance beds	2.76	per Sq feet of high maintenance beds
	Travel To Jobs	3,250	12500	miles	0.26	per mile
	Customer Billings and Service	8,750	25	Customer	350.00	per customer
	Total	151,800
	Note: Activity rate = Overhead cost of activity/ No. of total activity