Question
5. (70 points) As you Like it Gardening is a small gardening service that uses activity- based costing to estimate costs for pricing and other
5. (70 points) As you Like it 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 maintain 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 Miles Number of customers The total costs of each cost pool and the total activity are show below: Activity Cost Pool Est. yearly overhead cost Caring for lawns $77,400 Expected yearly activity 180,000 sq. feet of lawn Caring for beds, low main. $30,000 24,000 sq. feet of low Caring for beds, high main. $57,600 Travel to jobs $4,200 Customer billing and service $8,700 18,000 sq. feet of high 15,000 miles 30 customers a. Compute the activity rate for each of the activity cost pools. Round to the nearest penny. b. As You Like It is preparing a bid for a new customer with these estimated activities: 1,000 Sq. Feet of lawn 500 Sq. Feet of low maintenance beds 750 Sq. Feet of high maintenance beds 20 miles to customer's site What would the bid amount be for the year
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