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 $22.10 per hundred square feet.

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 $22.10 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, 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 for the Year Activity Measure Cleaning carpets Square feet cleaned (00s) 8,000 hundred square feet Travel to jobs Miles driven 203,500 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 $345,000, which includes the following costs: 141,000 Wages 20,000 Cleaning supplies Cleaning equipment depreciation 17,000 Vehicle expenses 29,000 67,000 Office expenses President's compensation 71,000 345,000 Total cost