Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. 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 customersparticularly those located on remote ranches that require considerable travel time. The owners daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, a simple system consisting of four activity cost pools seemed to be adequate. The activity cost pools and their activity measures appear below: The total cost of operating the company for the year is $430,000, which includes the following costs: Resource consumption is distributed across the activities as follows: Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on.

Put yourself in the place of a consultant and calculate the profitability of each service offered by this company and Identify "the winners and the losers" Further, figure out how to turn around the losing services , again as a consultant, Make your recommendations with specifics (numbers should accompany each recommendation). Also figure out how to capitalize on the "winners". Also come up with some cost management/containment ideas, again with specifics. Do not just make general statements about improving the profitability or reduce costs. Consultants are not paid to make general statements.

Activity for Activity Cost Pool Cleaning carpets Activity Measre Square feet cleaned (00s 20,000 hundred the Year square feet 60,000 miles 2,000 jobs Travel to jobs Job support Other (costs of idle capacity and organization-sustaining costs None Miles driven Number of jobs Not applicable