Question

# The Green Thumb Gardening Service provides gardening services to its clients. The company uses an activity-based...

The Green Thumb Gardening Service provides gardening services to its clients. The company uses an activity-based costing system for its overhead costs. The company has provided the following data from its activity-based costing system.

Activity Cost Pool   Total Cost    Total Activity

Gardening \$150,575 18,500 hours

Job support 29,375 1,815 jobs

Client support 5,270 270 clients

Other    65,000 Not applicable

Total    \$250,220

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.

One particular client, the Guzman family, requested 26 jobs during the year that required a total of 150 hours of gardening. For this service, the client was charged \$3,000.

Required:
a. Compute the activity rates for the activity cost pools. Round off all calculations for the nearest 2 decimals.
b. Using the activity-based costing system, compute the customer margin for the Guzman family. Round off all calculations to the nearest 2 decimals.
c. Assume the company decides instead to use a traditional costing system in which ALL costs are allocated to customers on the basis of gardening hours. Compute the margin for the Guzman family. Round off all calculations to the nearest 2 decimals.

 Req 1. Activity rate Activity Total OH Driver Rate gardening 150575 18500 8.14 Job Support 29375 1815 16.18 Client support 5270 270 19.52 Req 2. OH applied Activity Driver used Rate Overheads applied gardening 150 8.14 1221 Job Support 26 16.18 420.68 Client support 1 19.52 19.52 Total Overheads cost 1661.2 Revenue from Client 3000 Customer Margin 1338.8 Req 3. Total Overheads 250220 Divide: Total Grdening hours 18500 Oh rate per Gardening hour 13.53 Multiply: Gardening hours used in Jobs 150 Overheads applied 2029.5 Customer margin: Revenue charged from Job 3000 Less: Overheads applied 2029.5 Customer margin: 970.5