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 $23.80 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 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 Activity for Measure the Year Square feet hundred Cleaning carpets cleaned (005) 8,500 square feet Travel to jobs Miles driven 199,500 miles Job support Number of jobs 2,100 jobs Other (organization-sustaining costs and idle capacity costs) None Not applicable The total cost of operating the company for the year is $357,000 which includes the following costs: Wages $138,000 Cleaning supplies 20,000 Cleaning equipment depreciation 15,000 Vehicle expenses 39,000 office expenses 67,000 President's compensation 78,000 Total cost $357,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities cleaning Travel to Carpets Jobs Wages 78% 13% Cleaning supplies 100% 0% cleaning equipment depreciation 75% Vehicle expenses 83% office expenses 0% 0% President's compensation 0% 0% Job Support Other 0% 9% 0% 0% of old Total 100% 100% 0% 0% 58% 33% 25% 17% 42% 67% 100% 100% 100% 100% olo olo 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 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 $142.80 (600 square feet @ $23.80 per hundred square feet). Calculate the customer margin earned on this job. Job Support Other Prepare the first stage allocation of costs to the activity cost pools. Cleaning Carpets Travel to Jobs Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost $0 $0 $0 $O Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.) Activity Cost Pool Activity Rate Cleaning carpets per hundred square feet Travel to jobs per mile Job support per job Cost of the job Customer margin
