Question

In: Accounting

Problem 3: Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate...

Problem 3:

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

$

79,400

185,000

square feet of lawn

Caring for garden beds–low maintenance

$

32,000

26,000

square feet of low maintenance beds

Caring for garden beds–high maintenance

$

54,600

20,000

square feet of high maintenance beds

Travel to jobs

$

3,600

17,000

miles

Customer billing and service

$

7,500

34

customers

Required:

Compute the activity rate for each of the activity cost pools.

4. What are the three major types of product costs in a manufacturing company?

5. A company manufactures dressers and uses $100 worth of wood in each dresser. How would you classify the wood with respect to the following cost classifications?

Is the wood a product cost or period cost?

Is the wood a fixed cost or variable cost?

Is the wood a material cost or manufacturing overhead cost?

6. What is the main purpose for using managerial accounting in a business?

7. The company president makes $100,000 per year. You are the accountant and must determine how to properly classify the salary. How would you classify the salary with regard to the following cost classifications?

Is the salary a fixed or variable cost?

Is the salary a period or product cost?

Is the salary a direct labor cost or selling & administrative cost?

Solutions

Expert Solution

Answer.

Maintenance Cost

Maintenance cost refers to the cost that incurs when the company incurs expenses to maintain the goods and services. The cost that is incurred to store the inventory to maintain the quality of the inventory and to keep them in better condition. The maintenance cost is holding costs, day-to-day expenses, and more.

Answer 4.

Direct Material

Direct labor

Manufacturing Overhead

Answer 5.

A company manufactures dressers and uses $100 worth of wood in each dresser.

The wood is a material cost or manufacturing overhead cost.

Answr 6.

The Primary Purpose of Management Accounting is to analyze information. They determine problematic areas and develop ways to correct them. They use the information to develop Ways of increasing the company's profit.

Answer 7.

the salary is a direct labor cost or selling & administrative cost.


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Problem 3: Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate...
Problem 3: 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...
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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...
Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for...
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...
Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for...
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...
Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for...
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...
Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for...
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...
Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for...
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...
Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for...
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...
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