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 has already 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	$	85,800	165,000	square feet of lawn
Caring for garden beds–low maintenance	$	38,400	25,000	square feet of low maintenance beds
Caring for garden beds–high maintenance	$	53,200	19,000	square feet of high maintenance beds
Travel to jobs	$	3,600	16,000	miles
Customer billing and service	$	7,500	38	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 beds—low maintenance 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

The correct answer is :

Activity Cost Pool	Activity Rate
Caring for lawn	0.52	per square feet of lawn
Caring for garden beds–low maintenance	1.54	Per square feet of low maintenance beds
Caring for garden beds–high maintenance	2.80	Per square feet of high maintenance beds
Travel to jobs	0.23	Per mile
Customer billing and service	197.37	Per customer

Note :

Activity Cost Pool	Estimated		Expected Activity		Activity Rate ( Estimated Cost / Expected Activity)
	Overhead
	Cost
Caring for lawn	$	85,800	1,65,000	square feet of lawn	0.52
Caring for garden beds–low maintenance	$	38,400	25,000	square feet of low maintenance beds	1.54
Caring for garden beds–high maintenance	$	53,200	19,000	square feet of high maintenance beds	2.80
Travel to jobs	$	3,600	16,000	miles	0.23
Customer billing and service	$	7,500	38	customers	197.37