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Q1) As You Like It Gardening is small gardening service which uses activity-based costing to evaluate costs for pricing and other purposes. Proprietor of company thinks that costs are driven mainly by size of customer lawns, size of customer garden beds, distance to travel to customers, and number of customers. Additionally, cost of maintaining garden beds depends on whether beds are low-maintenance beds (primarily ordinary trees and shrubs) or high-maintenance beds (primarily flowers and exotic plants). Accordingly, company uses five activity cost pools given 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

Company has already performed its first-stage allocations of costs. 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 

problems:

find out activity rate for each of activity cost pools.

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

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M918868

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