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 PoolCaring for lawnCaring for garden beds-low maintenanceCaring for garden beds-high maintenanceTravel to jobsCustomer billing and serviceActivity MeasureSquare feet of lawnSquare feet of low maintenance bedsSquare feet of high maintenance bedsMilesNumber of customersThe company has already completed its first stageallocations of costs and has summarized its annual costsand activity as follows:EstimatedOverheadActivity Cost PoolCaring for lawnCaring for garden beds-low maintenance $ 40,800Caring for garden beds-high maintenance $ 47,090Travel to jobsCustomer billing and serviceExpected Activity190,000 square feet of lawn23,000 square feet of low maintenance beds17,000 square feet of high maintenance bedsCost$ 88,200$ 5,000$ 10,30014,000 miles34 customersRequired:Compute the activity rate for each of the activity cost pools.

Grouping of similar costs is called cost pooling , the factor that drives the cost of an activity is…

Answered: Green Thumb Gardening is a small…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter18: Activity-based Costing

Section: Chapter Questions

Problem 6PA: Product costing and decision analysis for a service company Pleasant Stay Medical Inc. wishes to...

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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
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 has already completed its first stage
allocations of costs and has summarized its annual costs
and activity as follows:
Estimated
Overhead
Activity Cost Pool
Caring for lawn
Caring for garden beds-low maintenance $ 40,800
Caring for garden beds-high maintenance $ 47,090
Travel to jobs
Customer billing and service
Expected Activity
190,000 square feet of lawn
23,000 square feet of low maintenance beds
17,000 square feet of high maintenance beds
Cost
$ 88,200
$ 5,000
$ 10,300
14,000 miles
34 customers
Required:
Compute the activity rate for each of the activity cost pools.

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