Answered step by step
Verified Expert Solution
Link Copied!

Question

00
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

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
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 $23.35 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 Activity for the Year Cleaning carpets Square feet cleaned (006) 8,000 hundred square feet Travel to jobs Miles driven 434,500 miles Job support Number of jobs 1,900 jobs Other (organization-sustaining costs and Idle capacity costs) Not applicable The total cost of operating the company for the year is $372,000 which includes the following costs: None Wages cleaning supplies $ 146,000 cleaning equipment depreciation 14,000 Vehicle expenses 8,000 Office expenses 35,000 President's compensation 70,000 79.000 Total cost $372.000 Resource consumption is distributed across the activities as follows: Distribution of resource Consumption Nerons Activities Cleaning Travel to Job Carpets Jobs Support Other Total Wages 756 150 ou Cleaning supplies 100 1000 1001 08 08 1001 cleaning equipment depreciation 681 00 09 324 1000 Vehicle expenses ON 831 ON 170 1001 office expenses 09 01 571 430 1003 President's compensation 01 01 280 720 1001 Job support consists of receiving calls from potential customers at the home office, scheduling jobs, biling, 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 56-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 $93.40 (400 square feet a $23.35 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 $ 0 0 0 Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost 0 0 0 0 0 $ 05 0 $ Required 1 Required 2 Required 3 Required 4 Compute the activity rates for the activity cost pools. (Round yo Activity Cost Pool Cleaning carpets Travel to jobs Job support Activity Rate per hundred square feet per mile per job Required 1 Required 2 Required 3 Required 4 The company recently completed a 400 square foot carpet-cleaning Job at the Flying N Ranch-a 56-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 1 Required 2 Required 3 Required 4 The revenue from the Flying N Ranch was $93.40 (4 hundred square feet $23.35 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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

International Macroeconomics

Authors: Robert C. Feenstra, Alan M. Taylor

5th Edition

1319218423, 9781319218423

Students also viewed these Accounting questions