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 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 company completed its first-stage cost allocations and summarized its annual costs and activity as follows: 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 Required: Estimated Overhead Cost $ 86,600 $ 39,200 $ 65,760 $ 5,000 $ 10,300 Compute the activity rate for each of the activity cost pools. Note: Round your answers to 2 decimal places. Expected Activity 175,000 square feet of lawn 30,000 square feet of low-maintenance beds 24,000 square feet of high-maintenance beds 21,000 miles 24 customers Activity Cost Pool Activity Rate Caring for lawn per square feet of lawn Caring for garden beds-low maintenance Caring for garden beds-high maintenance Travel to jobs Customer billing and service per square feet of low-maintenance beds per square feet of high-maintenance beds per mile per customer

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 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 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	$ 86,600	175,000	square feet of lawn
Caring for garden beds–low maintenance	$ 39,200	30,000	square feet of low-maintenance beds
Caring for garden beds–high maintenance	$ 65,760	24,000	square feet of high-maintenance beds
Travel to jobs	$ 5,000	21,000	miles
Customer billing and service	$ 10,300	24	customers