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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 Caring for lawn Caring for garden beds–low maintenance Caring for garden beds–high maintenance Travel to jobs Customer billing and service Activity Measure Square feet of lawn Square feet of low maintenance beds Square feet of high maintenance beds Miles Number of customers The company already has completed its first stage allocations of costs and has summarized its annual costs and activity as follows: Estimated Overhead Activity Cost Pool Caring for lawn Caring for garden beds–low maintenance Caring for garden beds–high maintenance Travel to jobs Customer billing and service Cost Expected Activity $ 81,800 $ 34,400 $ 58,380 $ 3,600 $ 7,500 170,000 square feet of lawn 27,000 square feet of low maintenance beds 21,000 square feet of high maintenance beds 18,000 miles 28 customers

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 Caring for lawn Caring for garden beds–low maintenance Caring for garden beds–high maintenance Travel to jobs Customer billing and service Activity Measure Square feet of lawn Square feet of low maintenance beds Square feet of high maintenance beds Miles Number of customers The company already has completed its first stage allocations of costs and has summarized its annual costs and activity as follows: Estimated Overhead Activity Cost Pool Caring for lawn Caring for garden beds–low maintenance Caring for garden beds–high maintenance Travel to jobs Customer billing and service Cost Expected Activity $ 81,800 $ 34,400 $ 58,380 $ 3,600 $ 7,500 170,000 square feet of lawn 27,000 square feet of low maintenance beds 21,000 square feet of high maintenance beds 18,000 miles 28 customers

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter11: Strategic Cost Management
Section: Chapter Questions
Problem 11E: Assign the customer-related activity costs to each customer type using activity rates. Now calculate...
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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 Caring for lawn Caring for garden beds–low maintenance Caring for garden beds–high maintenance Travel to jobs Customer billing and service Activity Measure Square feet of lawn Square feet of low maintenance beds Square feet of high maintenance beds Miles Number of customers The company already has completed its first stage allocations of costs and has summarized its annual costs and activity as follows: Estimated Overhead Activity Cost Pool Caring for lawn Caring for garden beds–low maintenance Caring for garden beds–high maintenance Travel to jobs Customer billing and service Cost Expected Activity $ 81,800 $ 34,400 $ 58,380 $ 3,600 $ 7,500 170,000 square feet of lawn 27,000 square feet of low maintenance beds 21,000 square feet of high maintenance beds 18,000 miles 28 customers
Transcribed Image Text: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 Caring for lawn Caring for garden beds–low maintenance Caring for garden beds–high maintenance Travel to jobs Customer billing and service Activity Measure Square feet of lawn Square feet of low maintenance beds Square feet of high maintenance beds Miles Number of customers The company already has completed its first stage allocations of costs and has summarized its annual costs and activity as follows: Estimated Overhead Activity Cost Pool Caring for lawn Caring for garden beds–low maintenance Caring for garden beds–high maintenance Travel to jobs Customer billing and service Cost Expected Activity $ 81,800 $ 34,400 $ 58,380 $ 3,600 $ 7,500 170,000 square feet of lawn 27,000 square feet of low maintenance beds 21,000 square feet of high maintenance beds 18,000 miles 28 customers
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