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 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 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 Estimated Overhead Cost Expected Activity
Caring for lawn $ 84,200 190,000 square feet of lawn
Caring for garden
beds–low maintenance $ 36,800 30,000 square feet of low maintenance beds
Caring for garden
beds–high maintenance $ 66,960 24,000 square feet of high maintenance beds
Travel to jobs $ 4,600 21,000 miles
Customer billing and
service $ 9,500 24 customers
Required:
Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.)
Activity Cost Pool Activity Rate
Caring for lawn per square foot of lawn
Caring for garden per square foot of low maintenance beds
Caring for garden
beds-high maintenance per square foot of high maintenance beds
Travel to jobs per mile
Customer billing and service per customer

Answer 1

Green Thumb Gardening

Activity cost pool Activity rate Activity measure

Caring for lawn ($84.2 / 190) = $0.4432 per sq ft of lawn

Caring for garden ($36.8 / 30) = $1.2267 per sq ft low main. beds

beds, low main.

Caring for garden ($66.96 / 24) = $2.79 per sq ft high main. beds

beds, high main.

Travel to jobs ($4.6 / 21) = $0.2 19 per mile

Customer billing ($9,500 / 24) = $395.83 per customer

and service

Due to space limitations, I used thousands in order to determine activity rates, e.g. $84,200 / 190,000 ⇒ $84.2 / 190 = $0.4432