2 Green Thumb Gardening is a small gardening service that us

2 Green Thumb Gardening is a small gardening service that uses activity The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer gardern beds, the distance to travel to customers, and the number of customers. In addition, the costs of 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 to estimate costs for pricing and other purposes. ing garden beds depends on 40 points Activity Heasure Caring for lavn caring for garden beds-low maintenance Caring for garden beds-high maintenance Travel to jobs Customer billing and service square feet of low maintenance beds Square feet of high maintenance beds The company already has completed its first stage allocations of costs and has summarized its annual costs and activity as follows 81,800 175,000 square teet of 1am $ 34,400 27,000 square feet of low maintenance beds 5 59,430 21,000 square feet of high maintenance beds s 3,600 18,000 miles s 7,500 Caring for garden beds-low maintenance Caring for garden beds-high maintenance travel to jobs Customer billing and service 4 customers Required: Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.)

Solution

under Activity Based Costing Overheads are Allocated Based on Cost Pool Consumed by Production process of that particular item. The Cost Pool Can be Measured Using Cost Driver(basis to measure).

Which is different for Traditional Overhead Allocation and will give correct basis for allocation.

Here In this case we just want to calculate Cost Driver Per Unit.

And In A full scenario question we will allocate Ovrhead based on Times of Cost Drivers they consumed (For Each Cost Pool) Sum Together All Cost Pool consumed On particular Production will give Total Overhead Allocated.

Activity Rate

(Overhead/Cost driver)

There are the Activity Rate

Activity Cost Pool	Estimated Total Overhead Cost	Cost Driver	Activity Rate (Overhead/Cost driver)
Caring for Lawn	$81,800	175,000	(81800/175000)=$0.47	per square ft of lawn
Caring for garden beds-low Maintenanace	$34,400	27,000	(34400/27000)=$1.27	per square ft low maintenance beds
Caring for garden beds-high Maintenanace	$59,430	21,000	(59430/2100)=$28.3	per square ft highmaintenance beds
Travel to jobs	$3,600	18,000	(3600/18000)=$0.2	per mile
Customer billing and service	$7,500	34	(7500/34)=$220.59	per customer