Q1) As You Like It Gardening is small gardening service which uses activity-based costing to evaluate costs for pricing and other purposes. Proprietor of company thinks that costs are driven mainly by size of customer lawns, size of customer garden beds, distance to travel to customers, and number of customers. Additionally, cost of maintaining garden beds depends on whether beds are low-maintenance beds (primarily ordinary trees and shrubs) or high-maintenance beds (primarily flowers and exotic plants). Accordingly, company uses five activity cost pools given 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 |
Company has already performed its first-stage allocations of costs. Company's annual costs and activities are summarized as follows:
| Activity cost Pool |
Estimated Overhead Cost |
Expected Activity |
| Caring for lawn |
$77400 |
180,000 square feet of lawn |
| Caring for garden beds-low maintenance |
$30000 |
24,000 square feet of low-maintenance beds |
| Caring for garden beds high maintenance |
$57600 |
18,000 square feet of high-maintenance beds |
| Travel to jobs |
$4200 |
15,000 miles |
| Customer billing and service |
$8700 |
30 customers |
Questions:
Calculate activity rate for each of activity cost pools.
| Activity Cost Pool |
Activity Rate |
| Caring for lawn |
$0.43 per square foot of lawn |
| Caring for garden beds- low maintenance |
$1.25 per square foot of low maintenance beds |
| Caring for garden beds- high maintenance |
$3.2 per square foot of high maintenance beds |
| Travel to jobs |
$0.28 per mile |
| Customer billing and service |
$290 per customer |