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 $22 95 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 Activity Cost Pool Activity Measure Activity for the Year Cleaning carpets Square feet cleaned (00s) 7,000 hundred square feet Travel to jobs Miles driven 202,500 miles Job support Number of jobs 1,800 jobs Other (organization sustaining costs and idle capacity costs) None Not applicable The total cost of operating the company for the year is $347,000 which includes the following costs Wages $ 143,000 Cleaning supplies 21,000 Cleaning equipment depreciation 12,000 Vehicle expenses 29,000 Office expenses 57,000 Presidents compensation 85,000 Total cost $ 347,000 Resource consumption is distributed across the activities as follows Distribution of Resource Consumption Across Activities Cleaning Carpets Travel to Jobs Job Support Other Total Wages 77 13 0 10 100 Cleaning supplies 100 0 0 0 100 Cleaning equipment depreciation 72 0 0 28 100 Vehicle expenses 0 77 0 23 100 Office expenses 0 0 56 44 100 Presidents compensation 0 0 32 68 100 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 Rancha 51 mile round trip journey from the companys offices in Bozeman Compute the cost of this job using the activity based costing system 4 The revenue from the Flying N Ranch was $45 90 (200 square feet $22 95 per hundred square feet) Calculate the customer margin earned on this job

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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

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 $22.95 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:

Activity Cost Pool	Activity Measure	Activity for the Year
Cleaning carpets	Square feet cleaned (00s)	7,000	hundred square feet
Travel to jobs	Miles driven	202,500	miles
Job support	Number of jobs	1,800	jobs
Other (organization-sustaining costs and idle capacity costs)	None	Not applicable

The total cost of operating the company for the year is $347,000 which includes the following costs:


Wages	$	143,000
Cleaning supplies		21,000
Cleaning equipment depreciation		12,000
Vehicle expenses		29,000
Office expenses		57,000
Presidents compensation		85,000
Total cost	$	347,000

Resource consumption is distributed across the activities as follows:

Distribution of Resource Consumption Across Activities
	Cleaning Carpets		Travel to Jobs		Job Support		Other		Total
Wages	77	%	13	%	0	%	10	%	100	%
Cleaning supplies	100	%	0	%	0	%	0	%	100	%
Cleaning equipment depreciation	72	%	0	%	0	%	28	%	100	%
Vehicle expenses	0	%	77	%	0	%	23	%	100	%
Office expenses	0	%	0	%	56	%	44	%	100	%
Presidents compensation	0	%	0	%	32	%	68	%	100	%

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 Rancha 51-mile round-trip journey from the companys offices in Bozeman. Compute the cost of this job using the activity-based costing system.

4. The revenue from the Flying N Ranch was $45.90 (200 square feet @ $22.95 per hundred square feet). Calculate the customer margin earned on this job.