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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 $22.45 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 (ees) 9,882 hundred square feet Travel to Jobs Miles driven 64,500 miles Job support Number of jobs 1,900 Jobs Other (organization-sustaining costs and idle capacity costs) Not applicable None The total cost of operating the company for the year is $352,000 which includes the following costs: Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost $ 139,800 28,600 14,000 31,000 59,000 81,eee 352.000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Travel Carpets to Jobs Job Support Other Wages 15% 10% Cleaning Supplies 1eex ex Cleaning equipment depreciation 66% 88 34% Vehicle expenses ex 83% ex 17% Office expenses 8% 66 62% 38% President's compensation 8% 83 336 67% 75% 8888 Total 100% 100% 100% 180% 100% 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 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 $134.70 (600 square feet @ $22.45 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 Other Total Prepare the first stage allocation of costs to the activity cost pools. Cleaning Travel to Job Support Carpets Jobs Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost
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