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 $23.30 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, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below:
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 $23.30 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 costing. 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 Cleaning carpets Travel to jobs Job support Other (organization-sustaining costs and idle capacity costs) Activity Measure Square feet cleaned (005) Miles driven Number of jobs Activity for the Year 6,500 hundred square feet 88,500 miles 1,900 jobs Not applicable None The total cost of operating the company for the year is $353,000 which includes the following costs: Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses office expenses President's compensation Total cost $ 140,000 26,000 12,000 37,000 61,000 77,000 $ 353,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Travel Carpets to Jobs Wages 725 111 Cleaning supplies 1001 05 cleaning equipment depreciation 701 05 Vehicle expenses 05 805 office expenses 05 01 President's compensation Job Support 08 05 05 Other 178 308 201 Total 1001 1001 1005 1005 1001 100 56 29 Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. Required: 1. Prepare the first-stage allocation of costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools. 3. The company recently completed a 200 square foot carpet-cleaning job at the Flying N Ranch-a 53-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 $46.60 (200 square feet @ $23.30 per hundred square feet). Calculate the customer margin earned on this job. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.) Activity Rate Activity Cost Pool Cleaning carpets Travel to jobs Job support per hundred square feet per mile per job
