Question: Item3 5points eBookHintReferences Check my workCheck My Work button is now enabled3 Item 3 Item 3 5 points Exercise 7-3 Compute Activity Rates [LO7-3] Green
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Exercise 7-3 Compute Activity Rates [LO7-3]
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 Pool | Activity Measure |
| Caring for lawn | Square feet of lawn |
| Caring for garden bedslow maintenance | Square feet of low maintenance beds |
| Caring for garden bedshigh maintenance | Square feet of high maintenance beds |
| Travel to jobs | Miles |
| Customer billing and service | Number 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 Pool | Estimated Overhead Cost | Expected Activity | ||
| Caring for lawn | $ | 72,000 | 150,000 | square feet of lawn |
| Caring for garden bedslow maintenance | $ | 26,400 | 20,000 | square feet of low maintenance beds |
| Caring for garden bedshigh maintenance | $ | 41,400 | 15,000 | square feet of high maintenance beds |
| Travel to jobs | $ | 3,250 | 12,500 | miles |
| Customer billing and service | $ | 8,750 | 25 | customers |
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