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 $28 per hundred square feet. However, there is some question about whether the company is 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, a simple system consisting of four activity cost pools seemed to be adequate. 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) 20,000 hundred square feet

Travel to jobs . . . . . . . . . . . . . . .. Miles driven 80,000 miles

Job support . . . . . . . . . . . . . . . . . . Number of jobs 5,000 jobs

Other (costs of idle capacity and organization-sustaining costs) . . . None Not applicable

The total cost of operating the company for the year is $550,000, which includes the following

costs:

Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $160,000

Cleaning supplies . . . . . . . . . . . . . . . . . . . . . 40,000

Cleaning equipment depreciation . . . . . . . . . 30,000

Vehicle expenses . . . . . . . . . . . . . . . . . . . . .. 90,000

Office expenses . . . . . . . . . . . . . . . . . . . . .. 60,000

President's compensation . . . . . . . . . . . . . . . 80,000

Total cost . . . . . . . . . . . . . . . . . . . . . . . . . . .. $460,000

Resource consumption is distributed across the activities as follows:

Distribution of Resource Consumption across Activities

Cleaning Travel to Job

Carpets Jobs Support Other Total

Wages . . . . . . . . . . . . . . . . . . . . .. 70% 20% 0% 10% 100%

Cleaning supplies . . . . . . . . . . . .. 100% 0% 0% 0% 100%

Cleaning equipment depreciation. . 80% 0% 0% 20% 100%

Vehicle expenses . . . . . . . . . . . .. 0% 60% 0% 40% 100%

Office expenses . . . . . . . . . . . . . . . 0% 0% 45% 55% 100%

President's compensation . . . . . .. 0% 0% 40% 60% 100%

Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on.

Required:

1. The company recently completed a 5 hundred square foot carpet-cleaning job at the Flying N Rancha 75-mile round-trip journey from the company's offices in Bozeman. Compute the cost of this job using the activity-based costing system.

2. The revenue from the Flying N ranch was $240 (5 hundred square feet @ $28 per hundred square feet). "Prepare a" report showing the margin from this job.