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Gallatin Carpet Cleaning has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $ 1 2 . 9
Gallatin Carpet Cleaning has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $ per hundred square feet. However, there is some question about whether the company is making a profit on jobs requiring considerable travel time. The owners daughter suggested answering this question by designing an activitybased costing system using the information shown below:
Activity Cost Pool Activity Measure Activity for the Year
Cleaning carpets Square feet cleaned s hundred square feet
Travel to jobs Miles driven miles
Job support Number of jobs jobs
Other organizationsustaining costs and idle capacity costs None Not applicable
The total cost of operating the company for the year is $ which includes the following costs:
Wages $
Cleaning supplies
Cleaning equipment depreciation
Vehicle expenses
Office expenses
Presidents compensation
Total cost $
She distributed these operating costs across her four activities as follows:
Distribution of Resource Consumption Across Activities
Cleaning Carpets Travel to Jobs Job Support Other Total
Wages
Cleaning supplies
Cleaning equipment depreciation
Vehicle expenses
Office expenses
Presidents compensation
Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on
Required:
Prepare the firststage allocation of costs to the activity cost pools.
Compute the activity rates for the activity cost pools.
The company recently completed a squarefoot carpetcleaning job at the Flying N Rancha mile roundtrip from the companys home office. Compute the cost of this job using the activitybased costing system.
The revenue from the Flying N Ranch was $ square feet @ $ per hundred square feet Calculate the customer margin earned on this job.
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