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Gallatin Carpet Cleaning Is a small, famly-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, famly-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 $22.45 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 requlre conslderable travel time. The owner's daughter, home for the summer from college, has suggested Investigating this question using activity-based costing. After some discusslon, she designed a simple system conslsting 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 Activity for the Year 14,eee hundred square feet Activity Measure Square feet cleaned (8es) 362, miles 1,7ee jobs Miles driven Number of jobs other (organization-sustaining costs and idle capacity costs) Not applicable None The total cost of operating the company for the year is $349,000 which Includes the following costs: Wages 147,eee cleaning supplies Cleaning equipment depreciation Vehicle expenses office expenses 21,eee 14,eee 27,eee 66,eee President's compensation 74,eee 349, eee Total cost Resource consumptlon is distributed across the activitles as follows: Distribution of Resource Consumption Across Activities cleaning Travel to Jobs Job Support other Total Carpets 74% 11% e% 15% 100% Wages cleaning supplies cleaning equipment depreciation Vehicle expenses office expenses 1ee% 10e% e% 69 % e% 31% 1ee% e% 79% 21% 10e% 59 % e% 41% 10e% President's compensation 34% 66% 10e% Job support consists of recelving calls from potentlal 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 400 square foot carpet-cleaning job at the Flying N Ranch-a 55-mile round-trip journey from the company's offices in Bozeman. Compute the cost of this job using the activity-based costling system. 4. The revenue from the Flying N Ranch was $89.80 (400 square feet @$2245 per hundred square feet). Calculate the customer margin earned on this job. Complete this question by entering your answers in the tabs below. Required 3 Required 1 Required 2 Required 4 Prepare the first-stage allocation of costs to the activity cost pools Cleaning Carpets Travel to Job Support Other Total Jobs Wages 108,780 18.170 22,050 147,000 Cleaning supplies 21,000 0 0 21,000 4,340 Cleaning equipment depreciation 9,880 0 0 14,000 Vehicle expenses 0 21,330 0 5,870 27,000 Office expenses 0 38,940 27,080 68,000 President's compensation 25,160 48,840 74,000 Total cost 139.440 37,500 64,100 107,960 349,000 Required 2 Required 1 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.) Activity Cost Pool Cleaning carpets Travel to jobs Activity Rate 9.96 per hundred square feet per mile Job support per job Required 3 Required 1 Required 2 Required 3 Required 4 Required 1 The company recently completed a 400 square foot carpet-cleaning job at the Flying N Ranch-a 55-mile round-trip journey from the company's offices in Bozeman. Compute the cost of this job using the activity-based costing system. (Round your intermediate calculations and final answer to 2 decimal places.) Cost of the job Required 2 Required 4 Required 1 Required 2 Required 3 Required 4 The revenue from the Flying N Ranch was $89.80 (4 hundred square feet @$22.45 per hundred square feet). Calcu late the customer margin earned on this job. (Negative customer margins should be indicated with a minus sign. Round your intermediate calculations and final answers to 2 decimal places.) Customer margin Required 4 Required 3
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