Finance Problem
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 PoolActivity MeasureCaring for lawnSquare feet of lawnCaring for garden beds-low maintenanceSquare feet of low maintenance bedsCaring for garden beds-high maintenanceSquare feet of high maintenance bedsTravel to jobsMilesCustomer billing and serviceNumber of customers
The company already has completed its first-stage allocations of costs and has summarized its annual costs and activity as follows:
Activity Cost PoolEstimated
Overhead
CostExpected ActivityCaring for lawn$81,000165,000square feet of lawnCaring for garden beds-low maintenance$33,60030,000square feet of low maintenance bedsCaring for garden beds-high maintenance$66,96024,000square feet of high maintenance bedsTravel to jobs$3,80021,000milesCustomer billing and service$7,90040customers
Required:
Compute the activity rate for each of the activity cost pools.
The response should include a reference list. One-inch margins, Using Times New Roman 12 pnt font, double-space and APA style of writing and citations.