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

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 $22.55 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 None Activity for the Year 10,000 hundred square feet 369,500 miles 1,900 jobs Not applicable The total cost of operating the company for the year is $348,000 which includes the following costs: Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost $ 148,000 32,000 8,000 25,000 58,000 77,000 $ 348,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Cleaning Travel to: Job Carpets Jobs Support Other Total 73% 12% 0% 15% 100% 100% 0% 0% 0% 100% 73% 0% 0% 27% 100% 0% 82% 0% 18% 100% 0% 04 55% 45% 100% 0% 0% 33% 67% 100% Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. 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 400 square foot carpet-cleaning job at the Flying N Ranch-a 58-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 $90.20 (400 square feet @ $22.55 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 Prepare the first-stage allocation of costs to the activity cost pools. Cleaning Carpets Travel to Jobs Job Support Other Total $ Wages 0 0 Cleaning supplies Cleaning equipment depreciation Vehicle expenses 0 0 0 Office expenses 0 President's compensation Total cost $ 0 $ 0 $ 0 $ 0 $ 0 C 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 Cleaning carpets Travel to jobs Job support Activity Rate per hundred square feet per mile per job < Required 1 Required 3> Complete this question by entering your answers in the tabs below. Required 1 Required 2 Require!3 Required 4 The company recently completed a 400 square foot carpet-cleaning job at the Flying N Ranch-a 58-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 Required 2 Required 4 > 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 $90.20 (4 hundred square feet @ $22.55 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 < Required 3 Required 4 >

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

Cima Learning System Management Accounting Performance Evaluation Edition

Authors: Robert Scarlett

4th Edition

0750684305, 978-0750684309

More Books

Students also viewed these Accounting questions

Question

7. Explain why retirees may be valuable as part-time employees.

Answered: 1 week ago