Answered step by step
Verified Expert Solution
Link Copied!

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 $23.00 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customersparticularly those located on remote ranches that require considerable travel time. The owners 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) 8,000 hundred square feet
Travel to jobs Miles driven 187,500 miles
Job support Number of jobs 2,100 jobs
Other (costs of idle capacity and organization-sustaining costs) None Not applicable

The total cost of operating the company for the year is $350,000, which includes the following costs:

Wages $ 143,000
Cleaning supplies 25,000
Cleaning equipment depreciation 11,000
Vehicle expenses 36,000
Office expenses 57,000
Presidents compensation 78,000
Total cost $ 350,000

Resource consumption is distributed across the activities as follows:

Distribution of Resource Consumption Across Activities

Cleaning Carpets Travel to Jobs Job Support Other Total
Wages 73 % 12 % 0 % 15 % 100 %
Cleaning supplies 100 % 0 % 0 % 0 % 100 %
Cleaning equipment depreciation 75 % 0 % 0 % 25 % 100 %
Vehicle expenses 0 % 78 % 0 % 22 % 100 %
Office expenses 0 % 0 % 65 % 35 % 100 %
Presidents compensation 0 % 0 % 30 % 70 % 100 %

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

2.

Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)

3.

The company recently completed a 8 hundred square foot carpet-cleaning job at the Flying N rancha 54.00-mile round-trip journey from the companys offices in Bozeman. Compute the cost of this job using the activity-based costing system. (Round your intermediate and final answers to 2 decimal places.)

For number 3 can you break down the calculations and show me how you get your answer please. That's where I seem to keep having issues.

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

Advanced Accounting

Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik

10th edition

0-07-794127-6, 978-0-07-79412, 978-0077431808

Students also viewed these Accounting questions

Question

Explain why needs motivate our behavior.

Answered: 1 week ago