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 $22.85 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 Cleaning carpets Travel to jobs Job support Other (organization-sustaining costs and idle capacity costs) Activity Measure Square feet cleaned (ees) Miles driven Number of jobs Activity for the Year 7,580 hundred square feet 206,000 miles 1,980 jobs None Not applicable The total cost of operating the company for the year is $346.000 which includes the following costs: $ Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost 147, Bea 21. Bea 18,888 27. sea 62. eee 71.829 $ 346, Bee Resource consumption is distributed across the activities as follows: Job Support Other Distribution of Resource Consumption Across Activities Cleaning Travel Carpets to Jobs Wages 77% 15% Cleaning supplies 100% 876 Cleaning equipment depreciation 72% Vehicle expenses 75% Office expenses President's compensation 28% 25% Total nepr 100% 100% 100 100% 100% 86 3616 32% 68% 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 Ranch-a 58-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 $137.10 (600 square feet @ $22.85 per hundred square feet). Calculate the customer margin earned on this job
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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