Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
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 $22.80 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 Activity Measure Activity for the Year Cleaning carpets Square feet cleaned (008) 6,500 hundred square feet Travel to jobs Miles driven 206,000 miles Job support Number of jobs 1,800 Jobs Other (organization-sustaining costs and idle capacity costs) Not applicable None The total cost of operating the company for the year is $354,000 which includes the following costs: Wages cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost $ 147,000 32,000 7.000 27,000 66,000 75,000 $ 354,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities cleaning Travel Job Distribution of Resource Consumption Across Activities Cleaning Travel Carpets to Jobs Wages 798 168 Cleaning supplies 1005 08 Cleaning equipment depreciation 748 Vehicle expenses 08 778 office expenses 08 08 President's compensation 08 08 08 Job Support 08 08 08 08 598 268 Other 58 08 268 238 41% 748 Total 1000 100% 1008 1008 1008 1000 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 600 square foot carpet-cleaning job at the Flying N Ranch-a 59-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 $136.80 (600 square feet o $22.80 per hundred square feet). Calculate the customer margin earned on this job. Complete this question by entering your answers in the tabs below. Complete this question by entering your answers in the tabs below. Other Total Required 1 Required 2 Required 3 Required 4 Prepare the first-stage allocation of costs to the activity cost pools. Cleaning Travel to Carpets Jobs Job Support Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost Required 1 Required 2 > 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 Cost Pool Activity Rate Cleaning carpets per hundred square feet Travel to jobs Job support per job per mile Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 The company recently completed a 600 square foot carpet-cleaning job at the Flying N Ranch-a 59-mile round-trip journey from the company's offices in Bozeman. Compute the cost of this job using the activity-based costing system. (Round your intermediate calculations and final answer to 2 decimal places.) Cost of the job Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 The revenue from the Flying N Ranch was $136.80 (6 hundred square feet @ $22.80 per hundred square feet). Calculate the customer margin earned on this job. (Negative customer margins should be indicated with a minus sign. Round your intermediate calculations and final answers to 2 decimal places.) Customer margin

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

SAP Certified Application Associate Financial Accounting With SAP ERP 6 0

Authors: Kiran K ,Augustine D

1st Edition

1544118724, 978-1544118727

More Books

Students also viewed these Accounting questions

Question

List behaviors to improve effective leadership in meetings

Answered: 1 week ago