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 $22.95 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 Cleaning carpets Square feet cleaned (005) Travel to jobs Miles driven Job Support Number of jobs Other (organization-sustaining costs and idle capacity costs) None The total cost of operating the company for the year is $375,000 which includes the following costs: Wages $ 141,000 Cleaning supplies 34,000 Cleaning equipment depreciation 13,000 Vehicle expenses 40,000 Office expenses 62,000 President's compensation 85,000 Total cost $ 375,600 Resource consumption is distributed across the activities as follows: Job Support 0% 01 144 Distribution of Resource Consumption Across Activities Cleaning Travel to Carpets Jobs Wages 71% Cleaning supplies 100% 06 Cleaning equipment depreciation 71% 0% Vehicle expenses 0% 85% Office expenses 0% 0% President's compensation 0% 0% 0% 0% 0% 64% 28% Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. 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 $22.95 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 Cleaning carpets Square feet cleaned (005) Travel to jobs Miles driven Job Support Number of jobs Other (organization-sustaining costs and idle capacity costs) None The total cost of operating the company for the year is $375,000 which includes the following costs: Wages $ 141,000 Cleaning supplies 34,000 Cleaning equipment depreciation 13,000 Vehicle expenses 40,000 Office expenses 62,000 President's compensation 85,000 Total cost $ 375,600 Resource consumption is distributed across the activities as follows: Job Support 0% 01 144 Distribution of Resource Consumption Across Activities Cleaning Travel to Carpets Jobs Wages 71% Cleaning supplies 100% 06 Cleaning equipment depreciation 71% 0% Vehicle expenses 0% 85% Office expenses 0% 0% President's compensation 0% 0% 0% 0% 0% 64% 28% Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on
