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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 $23.05 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 actlvity-based costing. After some discussion, she designed a simple system consisting of four actlvity cost pools. The activity cost pools and thelr actlvity measures appear below: The total cost of operating the company for the year is $361,000 which Includes the following costs: Resource consumption is distributed across the actlvitles as follows: Job support consists of recelving calls from potentlal customers at the home office, schedulling Jobs, billing, resolving Issues, and so on. Required: 1. Prepare the first-stage allocation of costs to the actlvity cost pools. 2. Compute the actlvity rates for the actlvity cost pools. 3. The company recently completed a 600 square foot carpet-cleanlng Job at the Flying N Ranch-a 55-mile round-trip Journey from the company's offices in Bozeman. Compute the cost of this job using the actlvity-based costing system. 4. The revenue from the Flylng N Ranch was $138.30 (600 square feet @ $23.05 per hundred square feet). Calculate the customer margin earned on this job
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