Question
Green Thumb Gardening is a small gardening service using activity-based costing to estimate costs for pricing and other purposes. The owner of the company believes
Green Thumb Gardening is a small gardening service using activity-based costing to estimate costs for pricing and other purposes. The owner of the company believes 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 depend 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 bedslow maintenance | Square feet of low-maintenance beds |
Caring for garden bedshigh maintenance | Square feet of high-maintenance beds |
Travel to jobs | Miles |
Customer billing and service | Number of customers |
The company completed its first-stage cost allocations and summarized its annual costs and activity as follows:
Activity Cost Pool | Estimated Overhead Cost | Expected Activity | |
---|---|---|---|
Caring for lawn | $ 77,800 | 165,000 | square feet of lawn |
Caring for garden bedslow maintenance | $ 30,400 | 27,000 | square feet of low-maintenance beds |
Caring for garden bedshigh maintenance | $ 59,010 | 21,000 | square feet of high-maintenance beds |
Travel to jobs | $ 4,000 | 18,000 | miles |
Customer billing and service | $ 8,300 | 28 | customers |
Required:
Compute the activity rate for each of the activity cost pools.
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