Answered step by step
Verified Expert Solution
Question
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
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 Activity for the Year Cleaning carpets Square feet cleaned (s) 12,000 hundred square feet Travel to jobs Mites driven 120,000 miles Job Support Number of jobs 1,900 Jobs Other Sorganization-sustaining costs and idle capacity costs) Not applicable The total cost of operating the company for the year is $367,000 which includes the following costs None Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses ortice expenses President's compensation Total cost $ 136,000 31,000 14.000 35,000 59,000 82.000 $367.00 Resource consumption is distributed across the activities as follows: 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 741 119 88 15% 1089 Cleaning supplies 100 es 89 100% Cleaning equipment depreciation 715 09 04 294 100% Vehicle expenses ON 79% 04 219 1004 Office expenses ON BS 579 434 100 President's compensation 09 es 659 100 Job support consists of receiving calls from potential customers at the home office, scheduling Jobs, biling, resolving issues, and so 35 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 60-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 $91.80 (400 square feet @ $22.95 per hundred square feet). Calculate the customer margin earned on this job. Answer is complete but not entirely correct. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 The company recently completed a 400 square foot carpet-cleaning job at the Flying N Ranch - 60-mile round-trip joumay 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 $36.33
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started