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 $23.75 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 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 PoolActivity MeasureActivity for the YearCleaning carpetsSquare feet cleaned (00s)10,000hundred square feetTravel to jobsMiles driven238,500milesJob supportNumber of jobs2,100jobsOther (organization-sustaining costs and idle capacity costs)NoneNot applicable

The total cost of operating the company for the year is $353,000 which includes the following costs:

Wages$140,000Cleaning supplies27,000Cleaning equipment depreciation14,000Vehicle expenses28,000Office expenses68,000President's compensation76,000Total cost$353,000

Resource consumption is distributed across the activities as follows:

Distribution of Resource Consumption Across ActivitiesCleaning CarpetsTravel to JobsJob SupportOtherTotalWages75%13%0%12%100%Cleaning supplies100%0%0%0%100%Cleaning equipment depreciation66%0%0%34%100%Vehicle expenses0%80%0%20%100%Office expenses0%0%58%42%100%President's compensation0%0%25%75%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 600 square foot carpet-cleaning job at the Flying N Rancha 55-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 $142.50 (600 square feet @ $23.75 per hundred square feet). Calculate the customer margin earned on this job.

Prepare the first-stage allocation of costs to the activity cost pools.Prepare the first-stage allocation of costs to the activity cost pools.

Cleaning, Carpets , Travel to Jobs, Job Support , Other , Total

Wages

Cleaning supplies

Cleaning equipment depreciation

Vehicle expenses

Office expenses

President's compensation

Total cost

Cleaning CarpetsTravel to JobsJob SupportOtherTotalWagesCleaning suppliesCleaning equipment depreciation Vehicle expensesOffice expensesPresident's compensationTotal cost