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	$	81,800	175,000	square feet of lawn
Caring for garden beds–low maintenance	$	34,400	22,000	square feet of low maintenance beds
Caring for garden beds–high maintenance	$	43,360	16,000	square feet of high maintenance beds
Travel to jobs	$	3,400	13,000	miles
Customer billing and service	$	7,100	20	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 ft of lawn Caring for garden beds—low maintenance per square ft of low maintenance beds Caring for garden beds—high maintenance per square ft of high maintenance beds Travel to jobs per mile Customer billing and service per customer

Answer 1

Activity Cost Pool	Estimated Overhead Cost	Expected Activity		Activity Rate
					Caring for lawn	81,800	175,000	square feet of lawn	81,800/175,000 = $0.47 square feet of lawn
					Caring for garden beds–low maintenance	34,400	22,000	square feet of low maintenance beds	34,400/22,000 = $1.56 per square ft of low maintenance beds
Caring for garden beds–high maintenance	43,360	16,000	square feet of high maintenance beds	43,360/16,000 = $2.71   per square ft of high maintenance beds
Travel to jobs	3,400	13,000	miles	3,400/13,000 = $0.26 per miles
Customer billing and service	7,100	20	customers	7,100/20 = $355 per customers

Activity Cost Pool	Activity Rate
		Caring for lawn	$0.47 square feet of lawn
		Caring for garden beds–low maintenance	$1.56 per square ft of low maintenance beds
Caring for garden beds–high maintenance	$2.71   per square ft of high maintenance beds
Travel to jobs	$0.26 per miles
Customer billing and service	$355 per customers