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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 $22.95 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, a simple system consisting of four activity cost pools seemed to be adequate. The activity cost pools and their activity measures appear below Activity Measure Activity for the Year 10,000 hundred square feet 206,500 miles Activity Cost Pool Cleaning carpets Travel to jobs Job support Other (costs of idle capacity and Square feet cleaned (00s) Miles driven Number of jobs 1,800 jobs organization-sustaining costs) None Not applicable The total cost of operating the company for the year is $344,000, which includes the following costs Caoning suplies25000 141,000 30.000 Cleaning equipment depreciation 10,000 25,000 62,000 76,000 Vehicle expenses Office expenses President's compensation Total cost $ 344.000 Resource consumption is distributed across the activities as follows DOLL
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