Allocation of costs using activity based costingas you like

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Allocation of costs using Activity Based Costing.

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 cost 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 carried out its first-stage allocations of costs. The 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 

Required:
Compute the activity rate for each of the activity cost pools. (Omit the "$" sign in your response. Round your answers to 2 decimal places.)

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

 

Reference no: EM13355990

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