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 Cost Pool Caring for lawn. Caring for garden beds-low maintenance Caring for garden beds-high maintenance Travel to jobs Customer billing and service The company completed its first-stage cost allocations and summarized its annual costs and activity as follows: Square feet of lawn Square feet of low-maintenance beds Square feet of high-maintenance beds Miles Number of customers 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. Estimated Overhead Cost $ 84,200 $36,800 $ 49,320 $ 4,200 $ 8,700 Required: Compute the activity rate for each of the activity cost pools. Note: Round your answers to 2 decimal places. Activity Rate Expected Activity: 165,000 square feet of lawn 24,000 square feet of low-maintenance beds. 18,000 square feet of high-maintenance beds 15,000 miles. 32 customers per square feet of lawn per square feet of low-maintenance beds per square feet of high-maintenance beds per mile per customer
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 Cost Pool Caring for lawn. Caring for garden beds-low maintenance Caring for garden beds-high maintenance Travel to jobs Customer billing and service The company completed its first-stage cost allocations and summarized its annual costs and activity as follows: Square feet of lawn Square feet of low-maintenance beds Square feet of high-maintenance beds Miles Number of customers 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. Estimated Overhead Cost $ 84,200 $36,800 $ 49,320 $ 4,200 $ 8,700 Required: Compute the activity rate for each of the activity cost pools. Note: Round your answers to 2 decimal places. Activity Rate Expected Activity: 165,000 square feet of lawn 24,000 square feet of low-maintenance beds. 18,000 square feet of high-maintenance beds 15,000 miles. 32 customers per square feet of lawn per square feet of low-maintenance beds per square feet of high-maintenance beds per mile per customer
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
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
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
Estimated Overhead
Cost
$ 84,200
$ 36,800
$ 49,320
$ 4,200
$ 8,700
Required:
Compute the activity rate for each of the activity cost pools.
Note: Round your answers to 2 decimal places.
Activity Measure
Activity Rate
Expected Activity
165,000 square feet of lawn
24,000 square feet of low-maintenance beds
18,000 square feet of high-maintenance beds
15,000 miles
32 customers
per square feet of lawn
per square feet of low-maintenance beds
per square feet of high-maintenance beds
per mile
per customer
Expert Solution
Step 1: Activity-Based Costing
Activity-Based Costing is an accounting and costing methodology used by organizations to allocate costs more accurately to products, services, or other cost objects. ABC is particularly useful when traditional costing methods, such as absorption costing or job costing, do not provide a precise picture of how costs are incurred.
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