Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Mon- tana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $28 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers--particularly those located on remote ranches that require considerable travel time. The owner's daughter, home for the summer from college, has suggested investigating this question using activity-based cost- ing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below: Activity Cost Pool Activity Measure Activity for the Year Cleaning carpets Square feet cleaned (OOS) 20,000 hundred square feet Travel to jobs... Miles driven 60,000 miles Job support Number of jobs 2,000 jobs Other (organization-sustaining costs and idle capacity costs) ... None Not applicable The total cost of operating the company for the year is $430,000, which includes the following costs: Wages ... Cleaning supplies... Cleaning equipment depreciation Vehicle expenses. Office expenses Presidents compensation Total cost ... $150,000 40,000 20,000 80,000 60,000 80,000 $430,000 Resource consumption is distributed across the activities as follows: Total Cleaning Travel to Carpets Jobs 70% 20% 100% 80% 0% 0% 60% 0% 0% 0% 0% Wages ... Cleaning supplies... Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation 0% Job Support Other 0% 10% 0% 0% 0% 20% 0% 40% 45% 55% 40% 60% 100% 100% 100% 100% 100% 100% Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. Required: 1. Using Exhibit 76 as a guide, prepare the first-stage allocation of costs to the activity cost pools. 2. Using Exhibit 77 as a guide, compute the activity rates for the activity cost pools. 3. The company recently completed a 500 square foot carpet-cleaning job at the Flying N Ranch-a 75-mile round-trip journey from the company's offices in Bozeman. Compute the cost of this job using the activity-based costing system. 4. The revenue from the Flying N Ranch was $140 (500 square feet @ $28 per hundred square feet). Using Exhibit 7-12 as a guide, calculate the customer margin earned on this job. 5. What do you conclude concerning the profitability of the Flying N Ranch job? Explain. 6. What advice would you give the president concerning pricing jobs in the future