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Problem - As You Like It 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
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 has already completed its first-stage allocations of costs. The company's annual costs and activities are summarized as follows:
Estimated Overhead Cost
Expected Activity
$77,400
180,000 square feet of lawn
$30,000
24,000 square feet of low-maintenance beds
$57,600
18,000 square feet of high-maintenance beds
$4,200
15,000 miles
$8,700
30 customers
Required: Compute the activity rate for each of the activity cost pools.
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